Aug 25 2008
Aon to buy Benfield
The world’s largest insurance broker Aon Corporation is all set to acquire London based independent reinsurance firm Benfield group limited for a price quoted at $1.75 billion. The price roughly translates that Aon will pay $6.55 in cash for a share of Benfield and thereby go on to acquire Benfield’s $170 million net debt. This amount increases the premium of a Benfield share as on 21st august by a commendable 29%.Post merger the reinsurance company of Benfield will continue with its operations under the reinsurance wing of Aon, Aon Re Global, which will be subsequently renamed as Aon Benfield Re Group.
This acquisition of Benfield by Aon is its second reinsurance deal this year that in February it had announced its plans of buying the reinsurance brokerage firm of Arthur J Gallagher & Co. The new Aon Benfield Re Group will aim upon further strengthening the existing achievements of Aon Re Group and subsequently propel the brand further so as to lead to growth in insurance business and an increase in the business margin which subsequently would increase the value for its shareholders. The newly formed combined group is expected to expand its business base by acquiring control in regions of Africa, Latin America and Eastern Europe. Also, the expertise of Benfield would translate into taking a grip of situation in Florida and the southeast property catastrophe market of the United States of America.
Both the companies are expected to integrate completely by 2010 and then owing to the sharing module which would be adopted by both the companies in relation to their administrative and support services, the brokers are estimating that the amount which could be saved annually stands at a staggering figure of $122 million annually. The newly formed brand of Aon Benfield Re Group will be expected to serve the insurers and reinsurers on a Pro-forma basis. Subject to closing conditions, getting the necessary clearances and the approval of Benfield shareholders the merger is expected to close by the end of the year.