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(Reuters) — Marsh & McLennan Cos. Inc. is buying British insurance and reinsurance broker Jardine Lloyd Thompson Group PLC for £4.3 billion ($5.7 billion), the latest takeover in a sector hit by recent losses.
Shares in JLT, which reorganized earlier this year into three divisions and has been preparing for a so-called hard British exit from the European Union in March, leapt by 32.3%, just shy of Marsh & McLennan’s cash offer of 1,915 pence per share.
The record $135 billion paid out by specialty insurance players for hurricanes, wildfires and other natural and manmade disasters in 2017 has driven up premiums and spurred takeovers.
JLT Chief Executive Dominic Burke, who has been building out its U.S. specialty business, said the deal to create a company with annual revenue of $17 billion had been struck quickly and was first discussed formally on Sept. 7.
“We were not looking to sell, we were approached by MMC and it was a compelling offer,” Mr. Burke, who will join MMC as vice chairman, said on a media conference call. “We saw it as opportunity rather than threat.”
Other big deals so far this year include France’s Axa SA buying Bermuda-based XL Group PLC for $15.3 billion in March, after American International Group Inc. said it would buy reinsurer Validus Holdings Ltd. for around $5.6 billion.
Mutual insurer Covea Mutual Insurance Group Co. offered to buy Scor SE but was spurned by the French reinsurer, while there has also been private equity interest, with Apollo Global Management LLC last month agreeing to buy Aspen Insurance Holdings Ltd.
Marsh & McLennan’s takeover of JLT, which implies an enterprise value of about £4.9 billion, boosts a risk and insurance business whose revenue rose 7% to $7.63 billion in 2017, or just over half of the company’s total sales.
Panmure Gordon analyst Barrie Cornes said the offer was “fabulous” for JLT shareholder and heightened the possibility of other approaches in the sector.
But Canaccord Genuity analyst Joanna Parsons said a counterbid for JLT from Aon PLC, the most likely contender, was unlikely given the scale of the premium offered by Marsh & McLennan.
Marsh & McLennan said the deal is expected to achieve synergies of about $250 million within three years of completion, adding that it expects to cut 2% to 5% of the combined company’s jobs.
The companies said investors representing 40.45% of JLT’s stock, including top shareholder Jardine Matheson Group, had already undertaken to support the tie-up.
And JLT’s independent directors, advised by JP Morgan Cazenove and Simon Robertson Associates, intend to recommend that shareholders vote in favor of the deal, they added.
JLT’s Mr. Burke said he expected the deal to close in the next six months and did not expect any regulatory or competition issues as Marsh & McLennan had agreed to take any steps needed.
JLT Specialty USA, a unit of Jardine Lloyd Thompson Group P.L.C., on Friday said former Marsh USA Inc. practice leader Rob Hausler has been appointed executive vice president.