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Benfield on Friday agreed to an offer from Aon, the US insurance group, that values the reinsurance broker 350p a share or £844m and represents a 29 per cent premium to the previous close.
Shortly after the deal was announced, Benfield shares were up almost 30 per cent at 351¾p, having closed Thursday at 271p. It was the biggest gainer in the FTSE 250. The offer also represented an almost 40 per cent premium to Benfield’s average share price over the last 30 days, the company said.
Aon has long been rumoured to be interested in its UK rival. It said on Thursday that the tie-up would help it develop further in US property catastrophe markets in Florida and the south east in the hurricane-afflicted regions through Benfield’s ReMetrics unit, which specialises in quantitative risk modelling.
The deal will also give it greater presence in Asia - Benfield has long-standing client relationships in Japan - and Latin America, both of which are quick-growing markets.
The two said the merger would “create a truly global, diverse reinsurance franchise”. Benfield would be merged into Aon’s reinsurance business, to be renamed Aon Benfield Re.
Aon will fund the deal from its own cash reserves. Greg Case, president and chief executive of Aon, said there were strong cultural similarities between the two companies which would speed their integration.
The deal is expected to close by the end of the year. Aon said it had already received commitments from Benfield shareholders representing approximately 25.4 percent of the outstanding shares to support the transaction.