Shares of insurance broker Aon (NYSE:AON) took off like a rocket Monday, rising about 9% in 2:20 p.m. EDT trading, while its former merger partner Willis Towers Watson (NASDAQ:WLTW) saw its stock fall 8.8%.
And yes, you read that right: its former merger partner.
It's been more than a year since Aon and Willis Towers first announced their plans to merge. But as Aon announced this morning, Aon and Willis Towers have now mutually "agreed to terminate their business combination agreement and end litigation with the U.S. Department of Justice (DOJ)," which had opposed the merger on antimonopoly grounds, filing suit to block it last month.
"Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice," explained Aon CEO Greg Case.
Now here's the weird part: With Aon stock up and Willis Towers stock down, investors are clearly pleased by today's news, presumably on the belief that Aon's $30 billion bid to buy Willis Towers was too high a price to pay. (Willis Towers stock, by the way, now reflects this belief, falling to about $26.5 billion in market capitalization.)
And yet, today's news isn't as clear cut as that. With the merger deal now having fallen through, Aon will be obligated (and says it intends) to pay Willis Towers a $1 billion termination fee. While I certainly understand investors bidding up Aon on news that it won't overpay, I honestly don't get why Willis Towers shareholders have decided to sell their stock on news that...it's about to make a $1 billion windfall and keep the company besides.