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Willis strengthens European foothold with purchase of French broker

Willis strengthens European foothold with purchase of French broker

Willis Group Holdings P.L.C.'s €550 million ($598.1 million) offer to acquire the remaining 70% of Puteaux, France-based broker Gras Savoye & Cie. will extend the broker's reach and access to new clients.

“This is part of their expansion strategy,” said Laline S. Carvalho, director at Standard & Poor's Corp., in New York.

“Clearly it would increase their foothold in Europe,” said Ms. Carvalho. “It can be hard to get into some regional markets in Europe. Sometimes it's something that can take decades to achieve.”

“It gives them a broader scale and positioning in France and European markets,” said Jim Auden, managing director of insurance at Fitch Ratings Inc. in Chicago. The deal “probably gives Willis a slightly different client base.”

Following the completion of the transaction, which is expected at year-end, Gras Savoye is to become part of Willis but also will maintain its name and brand in key markets, including France.

The two combined firms ould have a presence in 131 countries, 84 of which would be wholly owned operations.

“I think it makes sense for Willis,” said Mr. Auden. “Willis owns 30% of Gras already, so it's a business they know,” which results in less potential risk associated with integration.

“It's not the biggest incremental revenue increase, but it builds scale for them” said Mr. Auden.

Willis made its initial investment in Gras Savoye in 1997 and owned as much as 49% of the company.

In 2009, Willis entered into an agreement with the company's family shareholders and Astorg Partners in which each entity assumed nearly 32% ownership.

In 2013, Willis extended a call option to buy all of Gras Savoye until June 2016.

The transaction is expected to close on or around Dec. 31, subject to customary regulatory consents and approvals, and acceptance of the firm offer by Gras Savoye's shareholders.

One key element of the deal is Willis' accelerating the timetable for completion from June 2016 to sometime before the end of the year.

“Usually a year or more tends to be on the longer end for timeframes for closings of mergers and acquisitions,” said Ms. Carvalho.

In addition to its offer, Willis has issued notice preserving its right under an existing shareholder agreement to acquire the remaining shares in Gras Savoye in June 2016, should this offer not be accepted.

For the year ended Dec. 31, Gras Savoye's net revenue was approximately €370 million ($402.3 million), with earnings before interest, taxes, depreciation and amortization of approximately €65 million ($70.7 million). Willis reported revenue of $3.8 billion in 2014 and is the world's third-largest insurance broker, according to Business Insurance's latest ranking.