Services Inc. for a total of about $1.23 billion, creating a global insurance and risk consulting powerhouse in a rapidly consolidating industry.

Aon, a Chicago-based insurance holding company that recently acquired British broker Bain Hogg, said it will pay $17.50 a share, or about $790 million, for the outstanding common stock of Alexander & Alexander.

It also said it will pay a total of $437.5 million to holders of Alexander & Alexander preferred stock.

Though it is too early to say how the move will affect the Bermuda subsidiaries of Aon and A&A, Alexander Insurance Managers Ltd. executive director Alan Cossar said there is likely to be some consolidation of Island operations.

Alexander Insurance Managers is Alexander & Alexander's captive management arm in Bermuda.

Mr. Cossar added that the move will create the world's largest insurance broker.

"Clearly that will create opportunities,'' he said.

Aon has two Bermuda operating subsidiaries. Robin Spencer-Arscott, chief executive officer of Aon Risk Services (Bermuda), said it was too early to tell what effect the takeover would have.

Alexander & Alexander's stock jumped $3.125 to $17.25 while Aon slipped 12.5 cents to $57.50, both on the New York Stock Exchange.

Alexander & Alexander, which is based in New York, is the fourth-largest insurance broker in the world. It has operations in 80 countries, primarily the United States, Canada and Britain.

Aon said it will begin a cash tender offer for Alexander & Alexander's common shares no later than Dec. 16 and upon completion of the tender offer the purchase of the preferred shares will begin.

"The combination of Aon, A&A and Bain Hogg, the most recent member of our corporate family, provides unparalleled resources and expertise for clients around the world,'' Aon Chairman Patrick G. Ryan said in a statement.

"A&A has chosen to merge with the premier company in the business,'' Alexander & Alexander Chairman Frank G. Zarb said. "With the combined strengths of both organisations, the new Aon will shape the future of this industry.'' -- Reuter