Aon will acquire Hewitt for $4.9 billion in cash and stock

Aon agrees to buy Hewitt for $4.9 billion

CHICAGO — Insurance conglomerate Aon Corp. said Monday it has agreed to buy human resources specialist Hewitt Associates for $4.9 billion in a cash-and-stock deal that would nearly triple the size of its consulting business.

The deal, assuming it is approved by regulators, is the company’s biggest ever and dramatically expands its push into human resources consulting worldwide. Aon is the world’s largest insurance broker but trails rival Marsh & McLennan Co., whose subsidiaries include Mercer and Oliver Wyman Group, in the size of its consulting business.

Hewitt, based in Lincolnshire, Ill., is one of the world’s biggest human resources consulting and outsourcing companies with over $3 billion in annual revenue and 23,000 employees in 32 countries.

Aon CEO Greg Case said on a conference call that his company, based in Chicago, aims to be the pre-eminent professional services firm in the world.

“As we continue to grow our business, this merger will give us a broader portfolio of innovative products and services,” he said.

Aon said it will pay $50 per Hewitt share, a 41 percent premium over Hewitt’s closing price Friday of $35.40.

That sent Hewitt shares up $11.39, or 32.2 percent, to close at $46.79 Monday after hitting a new high of $47.42 earlier in the session. Aon shares fell $2.72, or 7.1 percent, to $35.62, earlier trading at a 52-week low of $35.10.

Morningstar analyst Bill Bergman said Aon may have overpaid.

“The transaction reflects the favorable economics of combining commercial insurance brokerage and human resources consulting businesses under one umbrella,” he said in a note to investors. “But we are concerned about the price Aon is paying.”

Aon has made dozens of acquisitions in recent years aimed at strengthening and reorganizing the company in the face of declining insurance rates and weak economic growth. It has more than 36,000 employes in over 100 countries.

It plans to integrate Hewitt with its existing consulting and outsourcing operations and create a new unit, Aon Hewitt. Russ Fradin, chairman and chief executive of Hewitt, will become chairman and CEO of Aon Hewitt.

Aon said it expects the deal to 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.

Hewitt stockholders will receive $25.61 in cash and about 0.64 percent of a share in Aon stock per Hewitt share. The total payment will be $2.45 billion in cash and 64 million shares.

The deal is expected to close by mid-November.