⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

Exclusive - Aon explores $5 billion benefits outsourcing unit sale: sources

Published 07/12/2016, 21:17
© Reuters.  Exclusive - Aon explores $5 billion benefits outsourcing unit sale: sources
MS
-
AON
-
BX
-
KKR
-

By Greg Roumeliotis

(Reuters) - Insurance broker Aon Plc (N:AON) is exploring a sale of a division that other companies use to outsource the administration of employee benefits, potentially valuing it at more than $5 billion (£3.9 billion), people familiar with the matter said.

The divestiture would undo much of Aon's $4.9 billion acquisition of human resources services provider Hewitt Associates Inc in 2010, signaling the company now wants to focus more on its insurance and risk management businesses.

Aon is working with investment bank Morgan Stanley (N:MS) on a sale process for the unit, that has attracted interest from private equity firms, the people said on Wednesday.

Negotiations about how the unit may be carved out are complex and could take several more weeks, the sources added, cautioning that there is no certainty that Aon will decide to sell the business, which has 12-month earnings before interest, taxes, depreciation and amortization of close to $500 million.

The sources asked not to be identified because the negotiations are confidential.

"We are always exploring opportunities that enable us to accelerate innovation on behalf of our clients. Per company policy, we do not comment on rumors or speculation regarding our business," Aon said in a statement. Morgan Stanley declined to comment.

Aon shares jumped as much as 1.5 percent on the news to $114.90, giving the company a market capitalization of approximately $30 billion.

Headquartered in London, Aon is a risk management, insurance and reinsurance brokerage, and also provides human resources solutions and outsourcing services to companies in more than 120 countries.

Aon's benefits administration division facilitates the processing of claims for companies, including defined benefit, defined contribution, and health and welfare administrative services.

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

In September, Canadian pension fund manager Caisse de dépôt et placement du Québec agreed to acquire a $500 million minority stake in Sedgwick Claims Management Services Inc, a company specializing in workers' compensation that is owned by buyout firms KKR & Co LP (N:KKR) and Stone Point Capital LLC.

In another example, private equity firm Blackstone Group LP (N:BX) and Singaporean sovereign wealth fund GIC invested $750 million in 2014 to obtain minority stakes in Kronos Inc, a workforce management solutions company controlled by buyout firm Hellman & Friedman LLC.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.