Willis makes firm offer to buy Gras Savoye at year-end 2015

Willis Group has announced that it has made a firm offer to acquire the remaining 70 per cent that it does not currently own of Gras Savoye, the leading French insurance broker, and to accelerate closing.  The purchase price of the 70 per cent stake, including the repayment of outstanding third party debt (estimated to be €40 million), is approximately €550 million.

The Gras Savoye board of directors has received the offer positively. The transaction is expected to close on or around December 31, 2015, subject to customary regulatory consents and approvals, and acceptance of the firm offer by Gras Savoye’s shareholders, which can only occur after consultation with Gras Savoye’s workers' councils.

Uniting both companies would enhance our proposition as a multinational risk advisory, re/insurance broking, and human capital and benefits firm, with an extensive and largely wholly-owned international footprint. Together, the two firms combined would have scale through a presence in 131 countries, of which 84 would be wholly-owned operations. Gras Savoye would bring:

- A strong footprint in France, where Gras Savoye is the largest broker and enjoys a leading position in the mid-market sector, which holds further growth opportunities.

- The expertise and reach to serve multinationals, including in France, which is home to 31 of the Fortune Global 500 - a number that ranks it fourth globally and first in Europe

Access to high-growth economies and insurance markets, including Central and Eastern Europe, the Middle East, and a comprehensive network of 42 offices in 31 countries across Africa.

Strong property and casualty product capabilities and employee benefit products.

Combining the two complementary businesses would build on a working relationship between Gras Savoye and Willis of 40 years. The two companies know each other well, and this would be expected to facilitate a smooth and relatively quick operational integration process.

Gras Savoye’s expertise in key sectors and prominence in high-growth markets would be aligned and connected with Willis’s specialisms and global capabilities, creating distinctive product and service offerings that add significant value for clients.

Following the completion of the transaction, Gras Savoye would become part of the Willis Group, while maintaining its name and brand in key markets, including France.  Paris would become one of our global centres of excellence.

Dominic Casserley, CEO of Willis Group, said: “Our clients see us as the multinational risk adviser and broker of choice. In this next phase of our longstanding partnership, Willis and Gras Savoye would deepen further our client service offering and strengthen our reach and expertise. We would help clients in both fast-growing and developed markets to capture opportunities. This deal would unite two complementary global networks, the analytical expertise of both organisations, and two values-based operating models in order to bring more to our clients.”

Patrick Lucas, Chairman of Gras Savoye, said: “The board of Gras Savoye is delighted to receive the offer from Willis Group. We have worked together for forty years, and this offer is the logical next step in that relationship. Together we would be stronger and could present a truly impressive worldwide offering to clients, as well as professional development opportunities to our colleagues at Gras Savoye and at Willis. Gras Savoye would be elevated to the position of being one of the leading risk advisory and broking firms in the world.”

Tim Wright, CEO of Willis International, said: “Together, Willis and Gras Savoye would deliver more connected, specialised capabilities to our clients of today and tomorrow. As the world’s fifth largest insurance market, France is not only a major market in its own right, but also the home of many world-class multinationals. The combination of Willis and Gras Savoye would allow us to bring to these companies the full range of our global expertise in France and around the world.”

François Varagne, CEO of Gras Savoye, said: This combination would plug Gras Savoye directly into Willis’s world-class specialist industry knowledge, diversifying our offering to both clients and carriers. Colleagues across Gras Savoye would be inspired to find themselves part of a major multinational operation where they would have many opportunities to develop their talents.”

Transaction Terms:

The firm offer accelerates the expected closing of the transaction and the transfer of shares to on or around December 31, 2015, from June 2016. Willis has initiated this acceleration in order to bring the vision and benefits of the union to clients more quickly, and to consolidate Gras Savoye’s full year results for 2016.

In addition to this firm offer, however, Willis has issued notice preserving its right under an existing shareholder agreement to acquire the remaining shares in Gras Savoye in June 2016, should the firm offer not be accepted. In that event, the purchase price would be determined by a formula under that agreement.

Financial Background:

For the year ended December 31, 2014, under US GAAP, Gras Savoye’s net revenue was approximately €370 million[i], and their earnings before interest, taxes, depreciation and amortization (EBITDA) were approximately €65 million.

Given the complementary nature of the two businesses, we anticipate that the primary source of value creation would be revenue synergies associated with joint incremental growth.

The proposed acquisition of Gras Savoye is expected to be $0.06 to $0.08 dilutive on reported earnings per share (EPS) in 2016, mildly dilutive in 2017, and accretive in 2018. However, excluding the non-cash impact of amortization expense associated with the transaction, we expect the transaction to be accretive in the range of $0.13 to $0.17 per share in 2016.

 

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