Hewitt CEO to Stay After Proposed Aon/Hewitt Merger Closes

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September 13, 2010 Monday 03:39 PM EST

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Hewitt CEO to Stay After Proposed Aon/Hewitt Merger Closes

Meg Green

CHICAGO

Aon Corp., which is moving ahead with plans for its $4.9 billion merger with Hewitt Associates, said Hewitt's current Chief Executive Officer Russell P. Fradin has signed a five-year contract to stay on as chairman and CEO of Aon Hewitt.

Fradin will report to Greg Case, president and CEO of Aon.

Fradin has agreed to take a "substantial" portion of his change in control compensation in Aon restricted stock units that will be distributed only when he leaves Aon's employment, plus Fradin agreed to retain all future granted equity compensation awards (net of any amounts necessary to pay taxes and exercise prices) until he ceases to be employed by Aon, the company said in a statement.

Aon also said the following executives have been tapped to lead Aon Hewitt after the merger:

-- Baljit Dail, the CEO of Aon Consulting and COO of Aon Benfield, will become CEO of the merged company's consulting business.

-- Kristi Savacool, senior vice president of large market benefits outsourcing for Hewitt, will become CEO of the benefits administration business.

-- Jim Konieczny, president of human resources business process outsourcing for Hewitt, will become CEO of the HR business process outsourcing business.

-- Greg Besio, Aon's chief administrative officer, is leading the overall Aon Hewitt integration.

-- Scott Ordway, VP of finance and operations for Aon, will become the CFO of Aon Hewitt.

-- David Baruch, Hewitt chief information officer, will become the chief information officer of Aon Hewitt.

-- Neela Seenandan, global head of human resources for Aon Benfield, will become global head of HR for Aon Hewitt.

-- Mark Sproat, associate general counsel for Hewitt Outsourcing, will become chief counsel for Aon Hewitt.

Asked about job cuts resulting from the merger, David P. Prosperi, vice president of global public relations, said in an email: "It is reasonable to expect that there will be some job reductions as we identify cost efficiencies between the two firms. However, it is too early to provide any specifics as the merger has not yet been approved by the shareholders of the two companies, and we have not yet secured all of our regulatory approvals."

In August, Aon said it had secured $2.5 billion in funding for the cash portion of its $4.9 billion acquisition of human resources and outsourcing company Hewitt Associates (BestWire, Aug. 18, 2010).

The merger transaction, which triples the size of Aon's human resources and outsourcing business, is based on $50 a share for Hewitt stock, which is a 41% premium to Hewitt's closing stock price on July 9, the last trading day before the deal was announced. Aon said it intends to pay 50% cash and 50% Aon stock.

The transaction is pending approval from regulators and both companies' shareholders. Special shareholder meetings for both Aon and Hewitt have been called for Sept. 20, according to a filing with the U.S. Securities and Exchange Commission.

The acquisition is expected to add $3 billion in revenue to Aon's top line, which puts it neck-in-neck with its top rival, Marsh & McClennan Cos., in the competition to be the largest broker by total revenue (BestWire, July 19, 2010).

With $7.6 billion in annual revenue for 2009, Aon Corp. was the second-largest global broker, behind Marsh & McLennan Cos., which had $10.5 billion in total revenue, as ranked by Best's Review magazine (Best's Review, July 2010). In the previous year, Aon had been the top global broker, based on brokerage revenue.

Shares of Aon (NYSE: AON) were trading at $38.14 midday Sept. 13, up 0.98% from the previous close.

(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)

September 14, 2010

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