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Insider View: MMC-JLT deal

Sometimes when we talk of a deal coming as a “swoop” we journalists are exaggerating a little, but Dan Glaser’s bold move to take JLT is just that.

You would have to go back 10 years to Greg Case’s decisive outmanoeuvring of MMC in the fight to win reinsurance broker Benfield to witness something as rapid. JLT said on a call that the first approach to the its board only occurred on 7 September and here we are 11 days later staring at what looks like a done deal.

Nothing should be discounted, but with 40.5 percent of irrevocable shareholder acceptances behind MMC, this looks a tough party for Aon or Willis Towers Watson to crash.

Rumours of JLT exploring a deal come up with monotonous regularity in global insurance circles. It usually pays to discount them. Occasionally, cornerstone shareholder Jardine Matheson feels moved to issue a statement to the effect that JLT is a core holding and is not for sale. Then the speculation dies down and we get back on with life.

But when the price is right, perennial M&A rumours have a habit of finally coming true. All the analysis to follow will show that JLT’s exit is a rich price and one that CEO Dominic Burke can be proud of.

When he took over at the end of 2005 the stock was stuck in a 350-500 pence price range – an exit at over 1,900 pence with about 300 pence of dividends while you wait constitutes a commendable return for anyone who showed faith in Burke’s strategy.

Burke came to steady the ship after a failed expansion into US retail. The loss-making operations were disposed of and the company recovered. Yet the US itch remained to be scratched. A broker cannot become a true global player unless it wins a sizeable share of the vast US retail market.

And in 2014 the firm announced it would be having another go stateside, focusing on its core specialities. Traction was being achieved but progress was slow and costly, consistently bleeding losses every half-year.

The sale to MMC is an admission that sometimes it is better and quicker to be a seller than a slow and patient organic builder.

It is also an admission that the game is up in an over-brokered, over-expensed London market. As the $250mn a year cost synergy hammer falls, it is going to fall hardest in the UK capital.

MMC already has cost reduction measures in place; the absorption of JLT will simply add fuel to the synergies bonfire.

One of the last remaining big jewels in the London-headquartered broking crown has been plucked.

A big global broker just got bigger and the fallout will be considerable.

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