Aon to Pay $4.9 Billion for Hewitt

Aon says it expects to cover part of the cost by issuing unsecured notes.

Credit Suisse was Aon's financial advisor; Citigroup Global Markets Inc., New York, advised Hewitt.

Moody's Investors Service, New York, responded to the announcement by affirming the Baa2 rating it has placed on Aon's senior unsecured debt and changing the rating outlook to negative, from stable.

The proposed deal would expand Aon's human resource consulting and outsourcing capabilities and give the company a more balanced mix of insurance brokerage and consulting revenue, according to Bruce Ballentine, Moody's lead analyst for Aon.

The deal also could help Aon get a higher percentage of its consulting revenue from multi-year contracts, Ballentine says.

Ballentine says he has concerns about the debt Aon would be taking on to finance the acquisition and the potential for business disruptions when Aon was combining Hewitt's operations with its own.

"The proposed funding structure would more than double Aon's debt burden and reduce its financial flexibility, at least in the near term," Ballentine says.

Aon ended the first quarter with $2.1 billion in debt. The Hewitt deal financing would add about $2.5 billion to the debt total, Moody's says.

"Aon's earnings have been constrained by a series of restructuring charges over the past few years, and this pattern is likely to continue in connection with the Hewitt acquisition," Moody's says. "Large mergers often lead to headcount reductions, transitions to new business systems and other restructuring initiatives that can disrupt workforce productivity and client service."

Aon recently gained integrated experience when it acquired another company, Benfield Group Ltd., London, in 2008, Moody's says.

Two other large human resources consulting firms, Towers, Perrin, Forster & Crosby Inc., Stamford, Conn. and Watson Wyatt Worldwide Inc. Arlington, Va., to form Towers Watson & Company, New York. merged Jan. 1.