(Reuters) - Marsh & McLennan Companies Inc (MMC.N) has agreed to buy Jardine Lloyd Thompson JLT.L for about 4.3 billion pounds ($5.7 billion) as the U.S. financial services group looks to boost its speciality risk broking and global reinsurance business.
Shares of the UK insurance and reinsurance broker rose 32.3 percent 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 percent to JLT stock’s closing price on Monday.
The deal consideration implies an enterprise value of about 4.9 billion pounds for JLT.
The deal comes as insurers have been looking to consolidate in a competitive market that has seen tougher regulations and softer pricing.
France’s AXA (AXAF.PA) moved to buy Bermuda-based XL Group for $15.3 billion in March, just over a month after American International Group (AIG.N) said it would buy reinsurer Validus for around $5.6 billion.
More recently, mutual insurer Covea offered to buy Scor (SCOR.PA), but was spurned by the French reinsurer. The sector has also seen interest from private equity, with Apollo Global Management (APO.N) agreeing to buy Aspen Insurance Holdings AHL.N last month.
“JLT has been fiercely independent in the past and so we are surprised to see a recommended bid from Marsh & McLennan (MMC) and uncertain about JLT’s motivations behind the headlines, Keefe, Bruyette and Woods analysts wrote in anote.
“But our knee-jerk 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.”
Investors representing 40.45 percent of JLT’s stock, including top shareholder Jardine Matheson Group, have already given irrevocable undertakings or letters of intent to support the tie-up.
JLT’s independent directors, advised by J.P. Morgan Cazenove and Simon Robertson Associates, intend to unanimously recommend that shareholders vote in favor of the deal, the companies said.
JLT has been building out its U.S. speciality business, which represented about 5 percent of the company’s revenue.
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.
Goldman Sachs was acting as financial adviser to MMC and MMC’s unit.
Slaughter and May and Wachtell, Lipton, Rosen & Katz provided legal advisers to MMC and its unit, while Clifford Chance LLP was legal advisers to JLT.
Reporting by Arathy S Nair in Bengaluru; Editing by Amrutha Gayathri and Keith Weir