Willis Towers Watson has agreed to acquire TRANZACT, a direct-to-consumer health care organization that links individuals to US insurance carriers, in a deal worth up to $1.4bn, from the Clayton, Dubilier & Rice (CD&R) fund and others.
The acquisition of TRANZACT is expected to fast track the direct-to-consumer strategy and ability of Willis Towers Watson to target the medicare market of nearly 50 million lives.
As per the terms of the deal, the global insurance brokerage firm will make a payment of $1.2bn to the health care firm for the acquisition, and up to $200m in the form of potential earn-out in 2021 subject to the achievement of certain financial targets.
Out of the total purchase price, $1.1bn will be made in cash, while the remaining $100m will be made either in cash or stock.
TRANZACT is said to connect individuals to major US insurance carriers by combining its digital marketing, sales and data science expertise. Currently, the company markets products such as Medicare Advantage, Prescription Drug Plan (PDP), and Medicare Supplement and a range of ancillary products such as dental, vision, life and indemnity.
It has a workforce of around 1,300 individuals, of which 850 are licensed agents, who match customers with the insurance policy that is appropriate to them.
Willis Towers Watson CEO John Haley said: “We are delighted to announce the acquisition of TRANZACT which represents a significant growth opportunity in the direct-to-consumer U.S. health care space and speaks to Willis Towers Watson’s renewed focus on strategic M&A opportunities.
“This deal will accelerate our direct-to-consumer strategy and help create an end-to-end consumer acquisition platform.”
Post-acquisition, the company will operate under Willis Towers Watson’s Benefits Delivery and Administration (BDA) business, which develops and provides administrative solutions for employers, employees and retirees.
TRANZACT CEO David Graf said: “We believe joining our complementary strengths and strategies will greatly benefit TRANZACT’s carriers and consumers. The powerful combination of our technology-driven, direct-to-consumer solutions and Willis Towers Watson’s scale, leading infrastructure and participant engagement capabilities creates a unique and differentiated capability in the marketplace.”
The deal, which will be based on satisfaction of customary closing conditions and regulatory approvals, is expected to be completed in the third quarter of 2019.
Upon its closing, the transaction is expected by Willis Towers Watson to be immediately accretive to it on adjusted earnings per share basis.