Joe Plumeri, Willis's chairman and chief executive officer ofWillis Group Holdings Ltd., said today his firm's $2.1 billionacquisition of Hilb Rogal & Hobbs Company will double its NorthAmerican revenues and add Willis's global reach to the HRH localmarket presence.

Willis announced the merger Sunday in a transaction that theinsurance brokerage said will strengthen its leadership inattractive growth markets. The new organization in North Americawill be renamed Willis HRH upon completion of the transaction.

Under the terms of the definitive agreement, Willis will acquireall of the outstanding shares of common stock of HRH for $46 ashare--50 percent cash and 50 percent stock--in a transactionhaving equity value of approximately $1.7 billion and an"enterprise value," or total purchase price, of about $2.1billion.

Mr. Plumeri said this price represents an "attractive valuationof 2.4 times estimated 2008 revenue, and less than 10-timesestimated 2008 EBIDA [defined as earnings before interest expense,income taxes, depreciation and amortization] including theassumption of an estimated $400 million of HRH debt."

"I want you to know this is a thrilling day for all of us," Mr.Plumeri said in a conference call. "This transaction more thandoubles Willis's North American revenues in a very complementarymanner."

The transaction will create a more "robust and diversifiedglobal company with tremendous added strength in key markets andbusiness lines," he added.

"Our plan in shaping our future called for enhancing ourpresence in major markets, increasing our employee benefits,increasing our personal lines and a lot of other things, which thistransaction does for us," he continued.

He said the transaction will strengthen Willis's leadership as amiddle-market broker and reinforce its large-account presence.

The transaction is "truly transformational for our NorthAmerican business. Only HRH has the scale and fit in attractivegrowth areas to take our business, we think, to the next level," hesaid. The merger will help Willis accelerate growth building on"strong performance momentum we've achieved through shaping ourfuture."

Mr. Plumeri said joining the firms will boost Willis's presencein key growth areas, including California, Florida, Texas,Illinois, New Jersey, New York, Boston and Philadelphia.

He said the merger also will mean doubling revenues of NorthAmerican employee benefits business, adding that this is a "stronginitiative for growing that business, because that business, webelieve, is a wonderful hedge to the vagaries of the pricingmarkets that we go through."

The transaction will add "depth and breadth" to other keypractice areas such as personal lines, which will more than triple,he said. Other areas include real estate, health care,environmental, construction, complex property and executive risk."So the complementary forces here just couldn't be better," hesaid.

Willis will also bring a global footprint and specialistexpertise to benefit HRH's retail network, Mr. Plumeri said.Outside the United States, he explained, "we'll be adding HRH'sLondon-based operations to further expand the range of ourspecialty expertise and blend in with the things we do inLondon."

Willis expects to achieve annualized synergies of $100 millionin 2010 through integrating operations, he said. "This onlyrepresents about an 8 percent of North America's pro forma 2007expense, based on a combined basis and about 3 percent of the proforma combined companies on a global basis."

On the topic of contingency fees, he said, "I know at this stagealso, I should talk about the issue of contingents and what willhappen in three years when the contingents go away."

He noted that HRH has about "$40-to-$50 million of contingencyfees included in the transaction, which Willis will be allowed totake, as per an amendment signed by Willis and the [New York]Attorney General."

Willis agreed to give up contingency fees when New Yorkauthorities, after an investigation, accused brokerages as usingthem to mask kickbacks from insurers they rigged bids with.

A contingent, he said, is "nothing more than increasedcommissions that you get from placing business with an insurer. Webelieve we should get paid that anyway, simply because of ourability to do transactions."

The combined amount of premium placed into the market in NorthAmerica between Willis and HRH, Mr. Plumeri added, is close to $20billion. "What that amounts to in three years is nothing more than25 basis points more of commission on the $20 billion, which is nota lot to ask for."

Overall, Mr. Plumeri said the transaction will "greatlystrengthen our leadership as a middle market broker and reinforceour large accounts practice."

"Most of our business is middle-market business, both in theU.S. and around the world. Financially, joining forces will put usin an even stronger position to drive significant benefits for ourWillis shareholders," he said

"We expect the transaction to be immediately accretive to cashearnings per share and accretive to GAAP earning per share inyear-two," he explained

Over time, Willis said it plans to repurchase a majority of theshares issued in connection with the transaction under itspreviously approved $1 billion buyback plan.

Willis expects the acquisition to be accretive to cash earningsper share from the close and to GAAP earnings per share from yeartwo.

Willis HRH will be led by an Office of the Chairman, includingDon Bailey (now chief executive officer of Willis North America) aschairman and CEO, F. Michael Crowley (now president and chiefoperating officer of HRH) as president and Martin L. Vaughan, III(now chairman and CEO of HRH) as vice chairman of Willis GroupHoldings.

Under the terms of the definitive agreement, HRH shareholderscan elect to receive the merger consideration in the form of cashor shares of common stock of Willis, subject to proration in orderto ensure that the cash and stock elections each represent 50percent of the total consideration paid.

In addition, the cash consideration is subject to increase above50 percent of the total consideration if the stock electionrepresents less than 50 percent of the total consideration or toensure that the number of shares issued by Willis does not exceed19.9 percent of the total number of shares outstanding at theeffective time of the transaction.

The definitive agreement includes a "collar." Half of the valueof the per-share merger consideration, or $23 (representing thecash component), is always fixed--whether a shareholder elects toreceive cash or stock, Willis explained.

The remaining value of the merger consideration (representingthe stock component) is calculated based on the average tradingprice of Willis common stock during the 10-day period ending twodays prior to the closing date.