Aon to sell benefits outsourcing to Blackstone for US$4.3b

[LONDON] Insurance broker Aon PLC said on Friday it agreed to sell its benefits administration and HR BPO platform to private equity firm Blackstone Group LP for US$4.3 billion in cash.

Aon could get up to US$500 million more based on future performance, as part of the deal.

London-headquartered Aon said it expected the deal to improve its return on invested capital and add to adjusted earnings per share in 2018.

Proceeds from the deal after tax are expected to be about US$3 billion, subject to customary working capital and other adjustments, Aon said.

The company also said it expects to allocate part of the proceeds from this transaction to increase its share repurchases.

The repurchase program has been increased by US$5 billion, bringing the total amount currently authorized for repurchases to about US$7.7 billion as of Feb 10, Aon added.

Reuters first reported the news on Thursday, citing sources who said Blackstone prevailed over buyout firm Clayton Dubilier & Rice LLC in an auction for the deal.

The deal gives Blackstone ownership of a business that processes work benefits for 15 per cent of the US population.

Private equity firms have been keen investors in businesses that help companies cut costs by outsourcing large parts of their administrative functions, since such operations can generate strong cash flows.

They typically seek to sell ownership of such assets at a big profit a few years after they invest.

Aon also reported better-than-expected fourth-quarter earnings helped by strength in its retail business.

The company's net income attributable to shareholders fell to US$502 million, or US$1.87 per share, in the fourth quarter ended Dec 31, from US$584 million, or US$2.09 per share, a year earlier.

On an adjusted basis Aon earned US$2.56 per share, beating the average analysts' estimate of US$2.49, according to Thomson Reuters I/B/E/S.

Morgan Stanley was Aon's financial adviser while Citigroup, Credit Suisse, and SMB Capital advised Blackstone.

Sidley Austin LLP provided legal counsel to Aon and Kirkland & Ellis LLP to Blackstone.

REUTERS