Aon will pay $50 in cash and stock for Hewitt, which represents a 41% premium over Hewitt's Friday closing price of $35.40. As the world’s largest insurance broker Aon Corp. said on Monday that it agreed to buy human resources company Hewitt Associates for $4.9 billion.
Aon expects the deal will save $355 million annually beginning in 2013, primarily from reducing back-office areas, management overlap and public company costs and getting more from technology platforms. It said the deal will help earnings in 2011 and 2012.
The Aon-Hewitt deal is the second major deal in the consultancy space in a year after Towers Perrin and Watson Wyatt agreed to a $3.5 billion merger to create the world's largest HR consultants. “In the short term it’s a negative,” said Meyer Shields, an analyst with Stifel Nicolaus & Co., who has a “buy” rating on Aon’s stock. “Integrations are always messy, and Aon is using an undervalued stock to pay for it.”
Shares of Hewitt rose more than 30 percent in trading before the bell after closing at $35.40 Friday on the New York Stock Exchange. Aon shares closed at $38.34 Friday.
“It’s definitely going to make them a much more consulting operation than they were before, There’s going to be some scale benefits. The other thing they get is better recognition. I think from a pure consulting perspective Hewitt is a better name than Aon.” said Paul Newsome, an analyst with Sandler O’Neill & Partners LP in Chicago.
Tags: aon hewitt, aon, hewitt associates, hewitt, avn
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