It is rare to get an overbid on a transaction and judging from the response of AON shareholders, they clearly believe the company agreed to pay too full a price for Hewitt Associates, but it is worth noting that Hewitt did not talk to any other potential buyers before agreeing to sell to AON for $50 a share.
Hewitt first approached AON about buying its small HR consulting practice, before AON turned around and asked whether Hewitt would be interested in a bigger deal, according to bankers close to the deal.
It’s also worth noting that the deal has a tiered break-up fee, which is only 1.7 percent ($85 million) of the deal price for the next 50 days, before jumping to $190 million. And so there is at least some hope in arbitrage circles that an Accenture or IBM will consider mounting a higher bid for Hewitt. Unlikely, but something I will keep on my radar.
On the also unlikely front is the idea that AON shareholders will vote the deal down. Today’s roughly 7 percent decline in the shares is far from a disaster, but takeover investors are paid to worry and so some are worried enough not to set up the deal by shorting AON shares, given its top holders include firms that have acted to stop deals in the past.
I’ll stay tuned, but keep in mind that in a similar deal which befuddled investors, Xerox’s purchase of ACS, ultimately closed without a huge fight.
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