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The world’s largest insurance brokerage provider, Aon Corporation (AON), is looking to expand its platform with a sizable venture into the human resources segment. Enter human-resource service company Hewitt Associates (HEW), which agreed to be acquired by Aon for $4.9 billion in cash and stock, or about $50 per HEW share. (Based on Hewitt's closing price on the day prior to the announcement, the offer implies a premium topping 40%.)

The transaction would triple the size of Aon’s consulting business and create the world’s largest human resources operation, surpassing the $4 billion merger of Towers Perrin and Watson Wyatt that was completed at the start of the year. The combined unit, to be named Aon Hewitt, would operate globally and is expected to generate annual revenues of around $4.3 billion. The deal is on target to close by mid-November, and Aon anticipates it would be accretive to earnings beginning in 2011 and generate annual cost savings of $355 million by 2013. 

This move provides Aon the ammunition it was looking for to compete in the human resources space, taking aim at the outsourcing and benefits businesses of insurance rivals, including Marsh & McLennan (MMC).

Investors did show some initial concerns regarding the creation of the human resources behemoth, as Aon shares traded lower on the news. The main sticking point is likely the $2.5 billion in debt that would be added to the company’s balance sheet, more than double its current leverage.

For now, though, the HR industry must make room for a new consulting giant.