Marsh & McLennan Inc. agreed to buy Jardine Lloyd Thompson for about 4.3 billion pounds ($5.7 billion) to expand its global offering of reinsurance and consulting services, adding to the frenetic pace of deal activity in the industry.
The New York-based purchaser said it aims to become the world’s leading company offering advice on risk, strategy and personnel. The purchase of JLT will strengthen its specialty risk broking, expand its global reinsurance network and enhance its position in Asia and Latin America, it said. The companies estimate that Marsh & McLennan’s revenue will rise to about $17 billion as a result of the acquisition.
The deal ranks among the largest ever involving insurance brokers, an industry that has drawn interest in recent years from private equity buyers attracted to a low-risk business and strategic investors seeking to boost share in a fragmented market. KKR & Co. last year teamed up with Canada’s Caisse de Depot et Placement du Quebec to acquire USI Insurance Services for $4.3 billion.
The 19.15 pounds-a-share cash offer is backed by both companies and represents a premium of 33.7 percent over the U.K. reinsurer’s closing price on Monday. JLT shares jumped by almost a third in London trading. JLT Chairman Geoffrey Howe called the bid “a compelling offer” in a statement.
‘Fabulous’ Price
The deal price is “fabulous” for JLT shareholders, Barrie Cornes at Panmure Gordon & Co. said. “We flagged our belief that the insurance sector would be in play, but saw JLT as an unlikely candidate given its valuation and the 40 percent shareholding” of Jardine Matheson Holdings Ltd.
JLT CEO Dominic Burke will join Marsh & McLennan as vice chairman and a member of the executive committee. The deal is meanwhile expected to generate 1.7 billion pounds in net proceeds for Jardine Matheson, the Asia-focused conglomerate.
Marsh & McLennan’s CEO Dan Glaser approached JLT’s Burke early this month about the deal, which came together in a matter of days largely because of the attractive price offered by the buyer, according to a person familiar with the matter. One of the pre-conditions of the offer was an agreement from JLT’s largest shareholder — Jardine Matheson –that it would tender all its shares, said the person, who asked not to be identified because the deliberations were private.
JLT’s independent directors were advised by J.P. Morgan Cazenove and Simon Robertson Associates, and Marsh & McLennan was advised by Goldman Sachs Group Inc. Goldman also provided a 5.2 billion-pound bridging loan for the purchase.
Updates with details of the deal process in the seventh paragraph.
–With assistance from Dinesh Nair.