A large insurance broker is scooping up a human resources consulting and benefits administration firm.

Aon Corp., Chicago (NYSE:AON), will acquire Hewitt Associates Inc., Lincolnshire, Ill. (NYSE:HEW), and merge Hewitt into the Aon Consulting unit in a deal with a value of about $4.9 billion, the companies said in a joint announcement.

Aon is set to pay $50 per Hewitt share with a 50-50 blend of cash and Aon stock. Hewitt shares closed at $35.40 July 9.

To complete the deal, Aon and Hewitt need approvals from the shareholders of both companies as well as from regulators. The companies hope to close on the transaction in mid-November.

If the deal is completed as planned, Hewitt Chairman Russell Fradin will become chairman of a new Aon Hewitt consulting unit and report to Aon Corp. Chief Executive Gregory Case, according to Aon and Hewitt.

Aon has more than 36,000 employees in more than 500 offices over 120 countries. The company as a whole reported $792 million in net income for 2009 on $7.6 billion in revenue; the company’s consulting and outsourcing business reported $203 million in operating income on $1.3 billion in revenue.

Hewitt was established in 1940 and now employs about 23,000 individuals worldwide. It reported $265 million in net income on $3.1 billion in revenue for its 2009 fiscal year, which ended Sept. 30, 2009.

Aon Consulting’s corporate clients tend to be midsize employers; most of Hewitt’s clients are large corporations.

The combined Aon Hewitt business would have 29,000 employees and $4.3 billion in annual revenue, according to Aon and Hewitt. About 49% of the revenue would come from consulting, 40% from benefits outsourcing and 11% from human resources process outsourcing, the companies say.

The companies say they expect the deal to help them save about $355 million per year by 2013, mostly by enabling them to cut back-office costs, cut the costs associated with running two separate public companies, eliminating management overlap and combining technology programs.

Morgan Stanley & Company Inc., New York, and Credit Suisse Securities (USA) L.L.C., New York, are helping to finance the deal.

To pay for the deal, Aon would issue $2.5 billion in new stock, take out a $1 billion, 3-year bank term loan, and use $1.5 billion in bridge loans, according to a financing document Aon and Hewitt have filed with the U.S. Securities and Exchange Commission.

Aon says it expects to cover part of the cost by issuing unsecured notes.

Credit Suisse was Aon’s financial advisor; Citigroup Global Markets Inc., New York, advised Hewitt.

Moody’s Investors Service, New York, responded to the announcement by affirming the Baa2 rating it has placed on Aon’s senior unsecured debt and changing the rating outlook to negative, from stable.

The proposed deal would expand Aon’s human resource consulting and outsourcing capabilities and give the company a more balanced mix of insurance brokerage and consulting revenue, according to Bruce Ballentine, Moody’s lead analyst for Aon.

The deal also could help Aon get a higher percentage of its consulting revenue from multi-year contracts, Ballentine says.

Ballentine says he has concerns about the debt Aon would be taking on to finance the acquisition and the potential for business disruptions when Aon was combining Hewitt’s operations with its own.

“The proposed funding structure would more than double Aon’s debt burden and reduce its financial flexibility, at least in the near term,” Ballentine says.

Aon ended the first quarter with $2.1 billion in debt. The Hewitt deal financing would add about $2.5 billion to the debt total, Moody’s says.

“Aon’s earnings have been constrained by a series of restructuring charges over the past few years, and this pattern is likely to continue in connection with the Hewitt acquisition,” Moody’s says. “Large mergers often lead to headcount reductions, transitions to new business systems and other restructuring initiatives that can disrupt workforce productivity and client service.”

Aon recently gained integrated experience when it acquired another company, Benfield Group Ltd., London, in 2008, Moody’s says.

Two other large human resources consulting firms, Towers, Perrin, Forster & Crosby Inc., Stamford, Conn. and Watson Wyatt Worldwide Inc. Arlington, Va., to form Towers Watson & Company, New York. merged Jan. 1.