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Aon Prices Senior Notes
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ShareTo finance the acquisition of Hewitt Associates, Inc. (HEW), Aon Corporation (AON - Snapshot Report) has priced its public offering of senior unsecured notes aggregating $1.5 billion. Aon anticipates closing the notes offering subject to customary closing conditions on September 10.
Aon will sell its notes in three parts, of which $600 million will mature on September 30, 2015 at a coupon of 3.50%. Another $600 million will bear a coupon of 5% maturing on September 30, 2020. The remaining $300 million will mature on September 30, 2040, carrying a coupon of 6.25%.
Aon will deposit the net proceeds from the notes offering into an escrow account, until the merger deal is completed, which is scheduled by mid-November.
Aon issued the notes by securing a bridge loan on August 13. The credit agreement was made with Credit Suisse AG (CS - Snapshot Report), who acted as the administrative agent for the syndicate, while Morgan Stanley Senior Funding Inc. of Morgan Stanley (MS - Analyst Report) was the syndication agent. Also, Bank of America Corp. (BAC - Analyst Report), Deutsche Bank Securities Inc. of Deutsche Bank AG (DB - Snapshot Report) and RBS Securities Inc. of Royal Bank of Scotland Group PI (RBS - Snapshot Report) acted as the co-documentation agents and co-arrangers for the term loan. Additionally, Credit Suisse and Morgan Stanley also acted as the joint lead arrangers and joint book-runners for the credit agreement.
In a separate arrangement to raise funds to acquire Hewitt, Aon also borrowed $1 billion by entering into a three-year term credit agreement with Credit Suisse that acted as the administrative agent. In addition, Morgan Stanley acted as the syndication agent, while Bank of America, Deutsche Bank and RBS were the co-documentation agents for the credit agreement.
Aon announced the merger with Hewitt on July 12 for worth $4.9 billion, consisting of 50% cash and 50% Aon stock. Upon completion, Hewitt will be integrated into Aon’s consulting services segment. Aon Consulting will operate the segment globally under the newly created Aon-Hewitt brand.
Moreover, Aon expects the acquisition to significantly add to its 2011 cash earnings and to its GAAP EPS in 2012. The combined entity also expects to generate cost synergies of nearly $355 million by 2013.
However, with the announcement of the deal, the rating agency Moody’s, a wing of Moody's Corporation (MCO - Analyst Report) lowered its ratings outlook on Aon to negative from stable. Moody’s stated that the deal would add about $2.5 billion to Aon’s debt, to enable it to finance the deal. Moody's has a senior unsecured debt rating of Baa2 on Aon, which currently carries a debt of about $2.1 billion.
On the other hand, Fitch Ratings has assigned a "BBB+" rating to Aon’s $1.5 billion senior unsecured notes, based on the company's strong balance sheet and reasonable debt profile.
We believe that the combined unit will broaden the customer base by adding Hewitt's large corporate client base to Aon's predominantly middle-market client base. Moreover, the deal will help Aon secure a strong position in the human resources and benefits outsourcing space.
Aon will sell its notes in three parts, of which $600 million will mature on September 30, 2015 at a coupon of 3.50%. Another $600 million will bear a coupon of 5% maturing on September 30, 2020. The remaining $300 million will mature on September 30, 2040, carrying a coupon of 6.25%.
Aon will deposit the net proceeds from the notes offering into an escrow account, until the merger deal is completed, which is scheduled by mid-November.
Aon issued the notes by securing a bridge loan on August 13. The credit agreement was made with Credit Suisse AG (CS - Snapshot Report), who acted as the administrative agent for the syndicate, while Morgan Stanley Senior Funding Inc. of Morgan Stanley (MS - Analyst Report) was the syndication agent. Also, Bank of America Corp. (BAC - Analyst Report), Deutsche Bank Securities Inc. of Deutsche Bank AG (DB - Snapshot Report) and RBS Securities Inc. of Royal Bank of Scotland Group PI (RBS - Snapshot Report) acted as the co-documentation agents and co-arrangers for the term loan. Additionally, Credit Suisse and Morgan Stanley also acted as the joint lead arrangers and joint book-runners for the credit agreement.
In a separate arrangement to raise funds to acquire Hewitt, Aon also borrowed $1 billion by entering into a three-year term credit agreement with Credit Suisse that acted as the administrative agent. In addition, Morgan Stanley acted as the syndication agent, while Bank of America, Deutsche Bank and RBS were the co-documentation agents for the credit agreement.
Aon announced the merger with Hewitt on July 12 for worth $4.9 billion, consisting of 50% cash and 50% Aon stock. Upon completion, Hewitt will be integrated into Aon’s consulting services segment. Aon Consulting will operate the segment globally under the newly created Aon-Hewitt brand.
Moreover, Aon expects the acquisition to significantly add to its 2011 cash earnings and to its GAAP EPS in 2012. The combined entity also expects to generate cost synergies of nearly $355 million by 2013.
However, with the announcement of the deal, the rating agency Moody’s, a wing of Moody's Corporation (MCO - Analyst Report) lowered its ratings outlook on Aon to negative from stable. Moody’s stated that the deal would add about $2.5 billion to Aon’s debt, to enable it to finance the deal. Moody's has a senior unsecured debt rating of Baa2 on Aon, which currently carries a debt of about $2.1 billion.
On the other hand, Fitch Ratings has assigned a "BBB+" rating to Aon’s $1.5 billion senior unsecured notes, based on the company's strong balance sheet and reasonable debt profile.
We believe that the combined unit will broaden the customer base by adding Hewitt's large corporate client base to Aon's predominantly middle-market client base. Moreover, the deal will help Aon secure a strong position in the human resources and benefits outsourcing space.
Read the full analyst report on HEW
Read the full analyst report on AON
Read the full analyst report on CS
Read the full analyst report on MS
Read the full analyst report on BAC
Read the full analyst report on DB
Read the full analyst report on RBS
Read the full analyst report on MCO
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