LONDON—Willis Group Holdings Ltd.'s decision to try to sell part of its stake in Gras Savoye & Cie could help the brokerage avoid a potential liquidity issue should it be obligated under its agreement to purchase the remaining shares in the Paris-based brokerage, analysts say.

Given Willis' leveraged $2.1 billion acquisition of Hilb Rogal & Hobbs Co. last year and the potential risk of Gras Savoye's shareholders exercising their option to “put” their shares to Willis, the London-based brokerages' potential sell-off is prudent, they say.

Willis gave no reason for its move in its June 17 Securities and Exchange Commission filing, but Willis Chairman and Chief Executive Officer Joe Plumeri told Business Insurance that, regardless of whether the broker sells part of its stake, it will continue its partnership with Gras Savoye and pursue a majority stake in the brokerage over time.

“Our goal eventually to own the majority has not changed and will not change,” Mr. Plumeri said.

Patrick Lucas, chairman and CEO of Gras Savoye, said Willis' decision will not affect the brokerage's operations, and that Gras Savoye will continue to partner with Willis as it has for more than a decade.

Willis acquired a minority interest in Gras Savoye in 1997 and has the right to increase its ownership to a majority stake over time (see chart, page 18). Willis owns 48% of the voting rights in Gras Savoye and could move to majority ownership beginning in December.

In addition, under two put options, existing Gras Savoye shareholders have the right to put their shares to Willis, which is obligated through 2011 to buy the shares at a price determined by a contractual formula based on earnings and revenues.

As of Dec. 31, 2008, family shareholders owned a 42% stake in Gras Savoye worth $285 million, SEC documents show. Gras Savoye management owned the remaining 10% stake in the firm; it was worth about $67 million at the end of last year but cannot be exercised until Jan. 1, 2011, the documents say.

Concerns over whether Willis might be obligated to take a majority stake surfaced earlier this year when AXA Corporate Solutions notified Willis that it intended to put its 4% ownership of Gras Savoye to Willis.

Ultimately, AXA sold its shares—valued at about $25 million—back to Gras Savoye and to family shareholders rather than Willis.

Mr. Plumeri addressed the issue on Willis' first-quarter analyst call in April.

“One of the top-of-mind issues at present is Gras Savoye putting their shares to us and further putting some tension and pressure on our balance sheet,” he said. “Hopefully by virtue of Gras Savoye and the families buying the 4% from AXA, it gives some sense that that is probably not going to be in the wind, although we are very strongly committed to a partnership in the future with Gras Savoye.”

Analysts say a potential sell-off of part of its stake makes sense for Willis.

“The timing isn't right now” for Willis to buy Gras Savoye, said Cliff Gallant, an analyst with Keefe, Bruyette & Woods Inc. in New York.

To finance the HRH deal, Willis purchased a 12-month bridge loan, which pressured its stock, Mr. Gallant said. While Willis found permanent financing, it was expensive, he said.

“The worry with Gras Savoye would be if the (existing shareholders) decided to put their shares to Willis, essentially forcing Willis to buy them. They might have to borrow money to do it and that would be more expensive debt that investors don't want to see right now,” Mr. Gallant said.

“Do I think it's going to happen?” said Keith Walsh, an analyst with Citigroup Research in New York, of whether Gras Savoye shareholders would put their shares to Willis. “I don't and I don't think Willis' management team necessarily believes that's going to happen. But at the same time, could it happen? Yes. And do they have $285 million lying around? At this point in time, that would be very difficult for them. They still have a high level of debt, and cash flow in the short term is very difficult for every company right now.”

Mr. Walsh said it's conceivable that Willis could sell its 48% stake in Gras Savoye and then buy the 42% stake under its put/call arrangement.

Meyer Shields, an analyst with Stifel, Nicolaus & Co. Inc. in Baltimore, said it's possible that Willis will seek to sell part of its stake in Gras Savoye to another firm that could strengthen the brokerage's operations and make it a more attractive buy for Willis down the road.

Mr. Plumeri alluded to such a scenario in the interview. “We might want to embark upon a strategy where we have other partners that help us build Gras Savoye and help Gras Savoye build so that, in the future when we do take a majority share, they're in a better position and our partnership is in a better position,” he said. “But nothing has been determined yet.”

Gras Savoye does not divulge its operating margins, but analysts say they are below Willis' historical margins.

Zack Phillips and Michael Bradford contributed to this story.