HG bonds: Arthur J. Gallagher sets 2-part deal backing revived M&A effort

Arthur J. Gallagher & Co. today completed an upsized $750 million offering of senior notes across 2.40% 10-year notes at T+90 and 3.05% long 30-year bonds at T+115. Proceeds are earmarkedfor general corporate purposes, which may include funding a portion of an in-progress M&A play, according to regulatory filings.

The company on Aug. 12 struck a deal to acquire the treaty reinsurance brokerage operations of Willis Towers Watson PLC for $3.25 billion, with potential additional deferred consideration of up to $750 million, measured off 2024 revenue and subject to be paid in 2025. The development marked the revival of a deal initially announced in May as a proposed regulatory remedy to facilitate a merger of Willis Towers Watson and Aon PLC. The deal was thwarted after the parties terminated the merger in July in the face of resistance to the plan at the U.S. Justice Department.

Arthur J. Gallagher intends to finance the transaction using cash on hand, including the $1.4 billion of net cash it raised in May via a follow-on common stock offering and the $850 million it raised via an offering of 3.50% 30-year senior bonds in May as part of a $1.5 billion, two-part bond offering), as well as short-term borrowings and/or capital market transactions.

Arthur J. Gallagher provides insurance brokerage, consulting and third-party claims settlement and administration services. The company's BBB/Baa2/BBB ratings profile reflects stable outlooks on all sides.

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