S&P Global Ratings says that Aon’s (A-/Stable/A-2) announced intention to acquire Willis Towers Watson (BBB/Watch Positive/–) has no immediate effect on its issuer credit rating on the company.
Aon intends to combine with Willis in an all-stock transaction (Willis shares will be exchanged to Aon shares) valued at about $30bn. Aon expects that the transaction to close by mid-year 2021, subject to regulatory approvals.

S&P said, “We think Aon’s credit measures have shown relatively good stability over the past five years through a period of sustained focus on organic growth amid a combination of acquisition/divestiture and expected financial leverage (per our calculations) mainly in the 2.4x-2.6x range, reflecting an adequate cushion below 3.0x following closing.

“We think that if this deal closes, it has the potential to enhance Aon’s business profile by strengthening its middle-market presence significantly while enhancing its overall scale, product depth, and operational capabilities. Mitigating concerns include integration risks associated with its transformational nature, revenue dis-synergies, key personnel loss, operational disruption, and potential effects of regulatory-driven constraints.

Willis Towers Watson’s ratings placed on CreditWatch positive

S&P also says that it placed its ‘BBB’ long-term issuer credit rating on Willis Towers Watson on CreditWatch with positive implications, as following the merger announcement.

S&P said, “This combination modestly improves our assessment of the strength of the combined entity’s business, creating a more-complete insurance broker in the large account and middle-market space. Collectively, the combination would produce the largest international insurance broker, with more than $20bn in internationally well-diversified annual revenues.”

The international credit rating agency says that it will resolve the CreditWatch listing when the proposed combination closes. If it closes as announced, S&P will equalise its ratings on Willis Towers Watson with those on Aon. If it does not, S&P says it will likely remove the ratings from CreditWatch and assign a stable outlook.

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