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MMC agrees to buy JLT in $5.7bn deal

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Marsh & McLennan Companies has agreed to buy insurance and reinsurance broker Jardine Lloyd Thompson for about $5.7 billion.

Both firms have offices in Bermuda, where they do broking, risk advisory and captive management business.

Cost-cutting is part of the rationale for the deal. In its statement, MMC said: “MMC anticipates that annual cost synergies of approximately $250 million will be realised over the next three years, and expects the realisation of those cost synergies to result in one-time integration costs of approximately $375 million.”

JLT Bermuda, based in offices in Cedar House, on Cedar Avenue, Hamilton, manages close to 60 captives on the island, with assets of more than $7 billion, writing more than $1 billion in premium according the firm's website.

JLT's reinsurance broking business in Bermuda has grown in recent years. In August 2017, partner and head of the Bermuda office, Guy Hengesbaugh, said JLT Re's Bermuda operation had more than doubled in size over the previous four years.

Shares of British-based JLT rose 32 per cent on the London Stock Exchange to 1,894 pence, just below MMC's all-cash offer of 1,915 pence, which was set at a premium of about 33.7 per cent to JLT stock's closing price on Monday.

Marsh and its sister company Guy Carpenter are global giants in the insurance and reinsurance broking business. In Bermuda, MMC also has a large captive management business. Its operations are based in the Power House, on Par-la-Ville Road, Hamilton.

Jardine Matheson, the Bermudian-based company that owns 40.16 per cent of JLT, this morning pledged its support for the takeover.

“Over the past 20 years, the management of JLT have successfully created one of the leading global specialist risk advisers and brokers, generating strong returns for all shareholders,” Jardine Matheson stated.

“The combination of JLT with Marsh is expected to enhance the ability to accelerate the growth of the two businesses across products, segments and geographies.

“The proceeds from the sale of Jardines' shareholding will also allow Jardines additional flexibility to take advantage of investment opportunities as they arise in its core sectors and geographic markets.”

Analysts from Keefe, Bruyette and Woods wrote in a note today: “JLT has been fiercely independent in the past and so we are surprised to see a recommended bid from Marsh & McLennan and uncertain about JLT's motivations behind the headlines.

“But our kneejerk response is that this is a good deal for JLT shareholders with the key governance parties already behind it and so closure is highly likely at the £19.15 pounds price.”

MMC, which expects annual revenue to rise to $17 billion after the deal closes, said JLT chief executive Dominic Burke is set to join MMC as vice-chairman.

The transaction is expected to close in the spring of 2019, pending regulatory approvals and the backing of JLT shareholders.

Consolidation has swept through the insurance and reinsurance industry in recent years, with the most recent large deals in Bermuda including Axa's acquisition of XL Group and private-equity firm Apollo Global Management agreeing to buy Aspen Insurance Holdings.

Acquisition: MMC's Bermuda operations are headquartered in the Power House on Par-la-Ville Road, Hamilton (Photograph by Blaire Simmons)
Takeover deal: Marsh & McLennan Companies has agreed to buy JLT

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Published September 18, 2018 at 1:09 pm (Updated September 18, 2018 at 7:50 pm)

MMC agrees to buy JLT in $5.7bn deal

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