Willis Group Holdings (NYSE: WSH), the third largest insurance broker, is about to become much bigger. Yes, the company has announced a $2.1 billion acquisition of Hilb Rogal & Hobbs (NYSE: HRH). The transaction is half cash and half stock. Although, Willis plans a $1 billion buyback to sop up the shares.

Based on the financials, the deal looks smart. Willis plans to realize annualized synergies of about $140 million by 2012. What's more, the transaction should be accretive to cash earnings on the close (which is expected in the Q4).

More importantly, Willis is likely to boost its growth. After all, there will be a doubling of North American revenues. There will also be a stronger footprint in New York, Boston, New Jersey, California, Florida, Philadelphia and Illinois. In other words, expect more pressure on McLennan Cos. (NYSE: MMC) and Aon (NYSE: AOC).

Something else: HRH will add expertise in key areas like personal lines, healthcare, environmental and executive risk.

No doubt, Willis is engaging in a transformative acquisition. The deal is the biggest in the sector since Marsh & McLennan's purchase of Sedgwick Group in 1998.

There are definitely some big risks for Willis.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Willis brokers a $2.1 billion deal for Hilb originally appeared on BloggingStocks on Mon, 09 Jun 2008 12:37:00 EST. Please see our terms for use of feeds.