Deal highly EPS accretive, but some concerns
MMC today announced the acquisition of Jardine Lloyd Thompson (JLT) for $6.4bn at a 34% premium to yesterday's close. The deal should complete in spring 2019 and be immediately accretive to cash EPS. The EV/EBITDA multiple of 19.5x looks expensive but moderates to a justifiable 11x when taking the full targeted cost synergies into account. We calculate that the transaction will be 9% accretive to adjusted cash EPS in 2021 but this moderates to 4% accretion if the buyback is cancelled for two years in order to reduce the gearing back to ~2.5x. Revenue dis-synergies could reduce the accretion by a further 1.5pp meaning that the potential upside could be considerably more limited than the initial mathematical calculations suggest.Marsh & McLennan Companies is a holding company. Through its subsidiaries, the company provides clients advice and solutions in risk, strategy and people. The company provides analysis, advice and transactional capabilities to clients. The company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions) as well as insurance and reinsurance broking and services; and Consulting, which includes health, wealth and career services and products, and other management, economic and brand consulting services.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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