To reorganise the capital of Gras Savoye

Willis Group Holdings Limited, an insurance broker, and the original family shareholders of Gras Savoye & Cie, a French insurance broker, have entered into a definitive agreement with Astorg Partners to reorganise the capital of Gras Savoye in a leveraged transaction.

Gras Savoye has been an associate company of Willis since 1997 when Willis acquired a 33% ownership interest. Since then, Willis has gradually increased its shareholding to 48.6% of voting rights (46.2% of outstanding shares). The family shareholders and management currently own 51.4% of the voting shares of Gras Savoye.

As per the terms of the transaction, Astorg Partners will acquire 33.3% of the voting rights (31.8% of outstanding shares) of a new holding company while Willis and the family shareholders will sell part of their stakes in Gras Savoye to Astorg Partners and roll over their remaining shares into the new holding company, through a combination of equity, convertible debt and seller financing.

Willis, the family shareholders of Gras Savoye, and Astorg will hold equal stakes of 31.8% in the new holding company and have equal representation of 33.3% of the voting rights on its Board. The remaining 4.5% will be held by a large pool of Gras Savoye managers.

This transaction values Willis’ existing investment in Gras Savoye at approximately $343m. Willis will roll over approximately $135m in equity and convertible debt and lend approximately $48m to the new holding company at a rate of 6% per annum. Willis expects to generate approximately $160m of tax-free net cash proceeds from the transaction, which it will use to pay down existing debt.

The agreement also gives Willis the option to purchase 100% of the capital in the new holding company in 2015, should it choose to do so, with notification in 2014. An existing put option, which gave family shareholders an option to sell their shares in Gras Savoye to Willis between now and 2011, will be cancelled at the closing of the transaction. The transaction is expected to close in the fourth quarter of 2009, subject to customary approvals and completion of financing.