Move would undo much of Aon’s 2010 acquisition of HR provider Hewitt Associates Inc.
(Reuters) — Insurance broker Aon Plc. is in advanced talks to sell its employee benefits outsourcing unit to buyout firm Clayton Dubilier & Rice LLC for nearly $4.5 billion, people familiar with the matter said on Thursday.
The divestiture would undo much of Aon's 2010 acquisition of human resources services provider Hewitt Associates Inc. for $4.9 billion, signaling that the company now wants to focus more on its insurance and risk management businesses.
After submitting an offer earlier this month, CD&R has prevailed over private equity firm Blackstone Group LP in an auction for the unit, the sources said. The sources cautioned that negotiations were ongoing and that the outcome could still change.
CD&R operating partner and former SunGard Data Systems Inc. chief executive officer Russell Fradin, who was Aon Hewitt's CEO from 2006 to 2011, is playing a key role in drafting a plan on how the unit can be separated from Aon, the sources said.
The unit for sale facilitates the processing of claims for companies, including defined benefit, defined contribution, and health and welfare administrative services.
Aon hopes to announce a deal by Feb. 10, when it plans to report fourth-quarter earnings, the sources said.
The sources requested anonymity because the negotiations are confidential. Aon and CD&R declined to comment, while Blackstone did not immediately respond to a request for comment.
Headquartered in London, Aon is active in more than 120 countries.
Private equity firms have been prolific investors in businesses that help companies cut costs by outsourcing large parts of their administrative functions, since such operations can generate strong cash flows. A few years after they invest, they seek to sell ownership of those assets at a big profit.
In September, Canadian pension fund manager Caisse de dépôt et placement du Québec said it would acquire a $500 million minority stake in Sedgwick Claims Management Services Inc., which specializes in workers' compensation and is owned by buyout firms KKR & Co LP and Stone Point Capital LLC.
In another example, Blackstone and Singaporean sovereign wealth fund GIC invested $750 million in 2014 to obtain minority stakes in Kronos Inc., a workforce management solutions company controlled by buyout firm Hellman & Friedman LLC.