Marsh & McLennan Cos Inc agreed to sell investigations unit Kroll to a firm led by former Marsh CEO Michael Cherkasky for $1.13 billion, less than the amount the insurance broker paid for it six years ago.
MMC said on Monday it plans to sell Kroll -- a corporate sleuth and intelligence expert that has expanded into risk management and other areas -- to Altegrity, a Virginia-based security solutions firm backed by private equity firm Providence Equity Partners, in an all-cash deal.
The Kroll acquisition is expected to close by late September.
Private equity firms are eager to do new deals after spending 18 months fixing companies and are encouraged by improving economic conditions and better availability of debt.
The deal value is made up of $760 million debt, a source close to the deal said, with the remainder equity.
Cherkasky, chief executive of Altegrity, will be reunited with Kroll, which he led from 2001 to 2004. Cherkasky was ousted as MMC CEO in late 2007 after producing disappointing results.
Cherkasky told Reuters he had been trying to pair Kroll with Altegrity or its predecessor firms for years.
It is really the fruition of something I thought made a lot of sense, Cherkasky said.
MMC shares closed down 2 percent at $20.57 on Monday on the New York Stock Exchange.
Cherkasky took over MMC in 2004 in the middle of a bid-rigging scandal in which the company faced charges from then-New York Attorney General Eliot Spitzer. Cherkasky, a friend of Spitzer, worked with him in the Manhattan district attorney's office.
Cherkasky joined Altegrity in 2008. In 2009 he hired former Los Angeles Police Chief William Bratton to lead Altegrity's security consulting unit.
A DIFFERENT BUSINESS
After Altegrity acquires Kroll, the companies will have a combined 11,000 employees.
MMC bought Kroll in 2004 for $1.9 billion, but agreed six years later to sell it for nearly $800 million less after the investigations unit sold off some of its units.
The components of the company at the time Marsh bought it was quite a bit different, Kroll CEO Ben Allen said.
Since MMC bought Kroll, the company has sold off several businesses including its drug-screening division, restructuring business and government services unit.
MMC has also written off about $855 million of goodwill, according to a research note from Citi, which estimates MMC is carrying Kroll at $1.05 billion. That means it will record a small gain, the note said.
The Financial Times had reported in March that MMC was seeking $1.3 billion for Kroll.
Kroll attracted interest from several private equity firms such as Carlyle , BC Partners Ltd and Apax Partners , sources previously told Reuters.
MMC said Goldman Sachs Group Inc and Apollo Investment Corp are providing debt financing for the transaction.
Jules Kroll, who founded the firm in 1972, is in the process of starting a credit rating agency aimed at competing with Moody's Corp and McGraw-Hill Cos Inc's Standard & Poor's.
(Reporting by Steve Eder, additional reporting by Megan Davies; Editing by Dave Zimmerman, John Wallace, Leslie Gevirtz and Phil Berlowitz)