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Aon to buy Hewitt Associates for $4.9 billion

Insurance brokerage and consulting giant Aon is seeking to expand its offerings to global employers navigating healthcare reform and employee financial benefits.

July 12, 2010|By Bruce Japsen

Aon Corp. has agreed to buy human resources consulting firm Hewitt Associates for $4.9 billion in cash and stock in a move to expand its offerings to global employers navigating the complexities of healthcare reform and employee financial benefits.

Chicago-based Aon, an insurance brokerage and consulting giant, will play a large role in uninsured individuals' and small employers' ability to buy health insurance once federal government subsidies are available in the next four years. Lincolnshire, Ill.-based Hewitt's business focuses on advising Fortune 500 companies on benefits and outsourcing.

The healthcare overhaul passed by Congress and signed into law four months ago by President Obama will bring 32 million uninsured Americans medical coverage. That will mean private insurance companies will gain millions of new customers, and small employers who have not provided health benefits will gain the ability to add employee health coverage.

"Aon will be the global leader in risk and human capital solutions," Greg Case, chief executive of Aon, said during a conference call with analysts and investors Monday. "This makes us a leader in human capital solutions."

Hewitt would be run by current Hewitt Chairman and Chief Executive Russ Fradin, who would become CEO of a unit called Aon Hewitt.

"This combination allows us to provide even more services for our clients and greater opportunities for our associates," Fradin said. "It gives us more products to cross-sell."

Fradin said Hewitt had already been looking to bolster its presence in the brokerage area. Hewitt already has one of the world's largest businesses advising global employers on health and financial benefits.

The companies expect the deal to begin benefiting Aon earnings next year.

Aon has agreed to pay $50 a share for Hewitt. That price is a 41% premium over Hewitt's closing price Friday of $35.40. Aon closed at $38.34 on Friday. The companies expect the deal to close by mid-November.

Aon's stock closed down 7.1% on Monday at $35.62 a share. It was among the biggest percentage losers on the New York Stock Exchange on Monday.

Hewitt shares closed up 32.2% to $46.79.

Tribune staff writer Becky Yerak contributed to this report.

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