Reinsurance, speciality and employee benefits provider Jardine Lloyd Thompson (JLT) has received an offer from US professional services group Marsh & McLennan (NYSE:MMC) valuing it at £4.3bn. This equates to 1,915p a share, a 33.7 per cent premium to the closing price the day prior to the offer being announced. Marsh has already received an irrevocable undertaking from Jardine Matheson, which owns 40 per cent of the shares, and with both boards recommending acceptance it seems likely that the deal will go through. The transaction will be effected through a UK court-sanctioned scheme of arrangement, and, subject to regulatory approval, is expected to close in the spring of 2019.
The deal will be funded through a combination of cash in hand and the proceeds from debt financing, and annual cost synergies arising from the takeover are expected to reach $250m (£190m) over the next three years. However, one-off integration costs are expected to rise to $375m, with job losses of between 2 and 5 per cent of the combined business, equivalent to around 3,750 jobs.
MMC plans to keep its headquarters in New York, but wants to expand its UK presence. It currently employs nearly 65,000 people and advises clients across 130 countries, with annual revenue of over $14bn. Jardine Lloyd Thompson delivered underlying profits of £109m in the six months to June, and is in the first year of what would have been a three-year cost efficiency programme, designed to give annual cost benefits of £40m by 2020. Once completed, the transaction is expected to be cash earnings accretive immediately, and to deliver a double-digit internal rate of return.
