Aon to buy NFP in $13.4 billion deal

(Reuters) — Aon PLC said Wednesday it will buy rival broker NFP Corp. in a deal valued at $13.4 billion to expand in the fast-growing middle-market segment across risk, benefits, wealth and retirement plan advisory.

The deal with funds affiliated with private-equity owners Madison Dearborn Partners and HPS Investment Partners is expected to close in mid-2024 and will be funded with $7 billion in cash and $6.4 billion in Aon stock.

The cash portion will be funded through new debt of $5 billion in 2024 and the rest at the close of the deal while trying to keep the current credit rating, Aon CFO Christa Davies said.

Aon shares fell 8% in morning trading as the company expects to incur $400 million in one-time transaction and integration costs related to the deal.

“Initially, the combined firm's adjusted operating margin could be lower than Aon's standalone margin. However, we expect to continue to drive adjusted operating margin expansion over the long term,” Ms. Davies said.

Aon said it expects the deal to generate more than $2.8 billion in pretax gains.

New York-based NFP is the 13th largest brokerage of U.S. business, reporting $1.72 billion in U.S. brokerage revenue in 2022,  according to Business Insurance’s most recent ranking.

NFP CEO Doug Hammond will continue to lead the business and will report to Aon President Eric Andersen.

NFP reported annual revenue of $738 million in the property/casualty segment in 2022, its website showed. Annual revenue at its benefits and life business was $1.11 billion.

UBS Investment Bank was the exclusive financial advisor to Aon on the transaction. Citi is advising it on the deal financing.