Aon and Willis Towers Watson (WTW) have agreed to offload Willis Re and certain WTW corporate risk and broking and health and benefits services to Arthur J. Gallagher for $3.57bn to gain regulatory clearance in Europe for their merger.

The transaction is said to resolve concerns raised by the European Commission and aims to address certain concerns raised by regulators in other countries.

The agreement specifically sees Gallagher acquiring Willis Re operations globally and global cedent facultative reinsurance, excluding mainland China and Hong Kong operations.

It also involves the acquisition of certain UK specialty, European and North American brokerage operations by Gallagher.

Gallagher expects the deal to deepen its global presence in retail property casualty and health & benefits brokerage.

The insurer also expects the transaction, which awaits regulatory nod, to provide it more depth in key niches and specialty operations including energy, construction, cyber, space, and aerospace products.

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Furthermore, it expects to benefit from access to a complete range of analytics capabilities. These include catastrophe modelling, dynamic financial analysis, rating agency analysis and capital modelling.

Gallagher will fund the deal through long-term debt, short-term borrowings, free cash and common equity.

The integration process is anticipated is to take around three years. The company expects total non-recurring integration costs of around $350m.

Gallagher chairman, president and CEO J. Patrick Gallagher, Jr. said: “This acquisition will accelerate our long-term strategy by significantly expanding our global value proposition in reinsurance, broadening our retail brokerage footprint and strengthening key niches and specialty brokerage offerings.”

Aon and WTW inked a definitive agreement last March to combine operations in an all-stock transaction. The proposed $30bn merger deal was cleared by shareholders in August 2020.

The European Commission launched an in-depth probe last December to evaluate the proposed acquisition of Willis Towers Watson by Aon, under the EU Merger Regulation.

The investigation followed the commission’s concern that the proposed deal could cut down competition.

The deal is expected to wrap up in the second half of 2021.