Aon to sell benefits outsourcing to Blackstone for up to $4.8 billion

Fri Feb 10, 2017 8:34am EST
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(Reuters) - Insurance broker Aon Plc (AON.N: Quote) said on Friday it agreed to sell its employee benefits outsourcing business to private equity firm Blackstone Group LP (BX.N: Quote) for up to $4.8 billion.

Blackstone will pay $4.3 billion upfront and up to an additional $500 million based on future performance.

London-headquartered Aon said it expected the deal to improve its return on invested capital and add to adjusted earnings per share in 2018.

Proceeds from the deal after tax are expected to be about $3 billion, subject to customary working capital and other adjustments, Aon said.

The company said it expects to use part of the proceeds to buy back shares and raised its repurchase program by $5 billion to $7.7 billion.

Reuters first reported the news on Thursday, citing sources who said Blackstone prevailed over buyout firm Clayton Dubilier & Rice LLC in an auction for the deal.

The deal allows Aon to exit a mature, capital-intensive outsourcing business and focus on growth areas such as cybersecurity and health insurance.

It also gives Blackstone ownership of a business that processes work benefits for 15 percent of the U.S. population.

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

FILE PHOTO -  The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid/File Photo