Insurance broker Aon Plc (AON.N) is exploring a sale of a division that other companies use to outsource the administration of employee benefits, potentially valuing it at more than $5 billion (£3.9 billion), people familiar with the matter said.
The divestiture would undo much of Aon's $4.9 billion acquisition of human resources services provider Hewitt Associates Inc in 2010, signaling the company now wants to focus more on its insurance and risk management businesses.
Aon is working with investment bank Morgan Stanley (MS.N) on a sale process for the unit, that has attracted interest from private equity firms, the people said on Wednesday.
Negotiations about how the unit may be carved out are complex and could take several more weeks, the sources added, cautioning that there is no certainty that Aon will decide to sell the business, which has 12-month earnings before interest, taxes, depreciation and amortization of close to $500 million.
The sources asked not to be identified because the negotiations are confidential.
"We are always exploring opportunities that enable us to accelerate innovation on behalf of our clients. Per company policy, we do not comment on rumors or speculation regarding our business," Aon said in a statement. Morgan Stanley declined to comment.
Aon shares jumped as much as 1.5 percent on the news to $114.90, giving the company a market capitalization of approximately $30 billion.
Headquartered in London, Aon is a risk management, insurance and reinsurance brokerage, and also provides human resources solutions and outsourcing services to companies in more than 120 countries.
Aon's benefits administration division facilitates the processing of claims for companies, including defined benefit, defined contribution, and health and welfare administrative services.
Private equity firms have been prolific investors in businesses that help companies cut costs by outsourcing large parts of their administrative functions, attracted by the strong cash flows that such operations can generate.
In September, Canadian pension fund manager Caisse de dépôt et placement du Québec agreed to acquire a $500 million minority stake in Sedgwick Claims Management Services Inc, a company specializing in workers' compensation that is owned by buyout firms KKR & Co LP (KKR.N) and Stone Point Capital LLC.
In another example, private equity firm Blackstone Group LP (BX.N) and Singaporean sovereign wealth fund GIC invested $750 million in 2014 to obtain minority stakes in Kronos Inc, a workforce management solutions company controlled by buyout firm Hellman & Friedman LLC.
(Reporting by Greg Roumeliotis in New York; Editing by Bernard Orr)