Aon to buy Lincolnshire-based Hewitt for $4.9 billion

How Lincolnshire-based Hewitt Associates Inc. will look once its merger with Aon Corp. is completed in mid-November is still unknown.

But expect some type of cuts involving "redundancies," Aon Chief Executive Officer Greg Case said during a conference call Monday.

"This combination creates a strong and compelling set of human capital across the entire industry," Case said. "This is about growth and building our firm."

A transition team is in place to analyze the merger. Aon has 36,000 workers and Hewitt has 23,000 workers worldwide. And whether the Lincolnshire office will remain viable is also being scrutinized, company officials said.

"While it's too early to speculate on job loss, I do know that these two marquee Chicagoland companies, once combined, plan to remain in the area," said Hewitt spokeswoman Maurissa Kanter.

Insurance conglomerate Aon said it has agreed to buy the human resources specialist and consulting firm for $4.9 billion in a cash-and-stock deal that would nearly triple the size of its consulting business.

The deal, assuming it is approved by regulators, is the company's biggest ever and dramatically expands its push into human resources consulting worldwide. Aon is the world's largest insurance broker but trails rival Marsh & McLennan Co., whose subsidiaries include Mercer and Oliver Wyman Group, in the size of its consulting business.

Hewitt is one of the world's biggest human resources consulting and outsourcing companies with over $3 billion in annual revenue and 23,000 employees in 32 countries.

Aon CEO Case said on a conference call that his company, based in Chicago, aims to be the pre-eminent professional services firm in the world.

"As we continue to grow our business, this merger will give us a broader portfolio of innovative products and services," he said.

Aon said it will pay $50 per Hewitt share, a 41 percent premium over Hewitt's closing price Friday of $35.40.

Chicago-based Morningstar analyst Bill Bergman said Aon may have overpaid.

"The transaction reflects the favorable economics of combining commercial insurance brokerage and human resources consulting businesses under one umbrella," he said in a note to investors. "But we are concerned about the price Aon is paying."

Aon has made dozens of acquisitions in recent years aimed at strengthening and reorganizing the company in the face of declining insurance rates and weak economic growth.

It plans to integrate Hewitt with its existing consulting and outsourcing operations and create a new unit, Aon Hewitt. Russ Fradin, chairman and chief executive of Hewitt, will become chairman and CEO of Aon Hewitt.

Aon said it expects the deal to save $355 million annually beginning in 2013, primarily from reducing back-office areas, management overlap and public company costs and getting more from technology platforms. It said the deal will help earnings in 2011 and 2012.

Hewitt stockholders will receive $25.61 in cash and about 0.64 percent of a share in Aon stock per Hewitt share. The total payment will be $2.45 billion in cash and 64 million shares.

"It's definitely going to make them a much more consulting operation than they were before," said Paul Newsome, an analyst with Sandler O'Neill & Partners LP in Chicago. "There's going to be some scale benefits. The other thing they get is better recognition. I think from a pure consulting perspective Hewitt is a better name than Aon."

• Daily Herald Business Writer Anna Marie Kukec contributed to this report.