TheStreet

Shares of Willis Towers Watson Plc (WLTW - Get Report) jumped Tuesday amid a report that insurance giant Aon  (AON - Get Report) is preparing a multibillion-dollar offer to buy its rival.

Willis Towers Watson's stock price rocketed more than 8% to $182.72 before settling back to $181.89, up 5.08%, as investors absorbed the news that the world's second-largest insurance brokerage is considering a run at the third largest.

The London-based insurer is preparing to submit an offer for cross-town rival Willis Towers, whose name is now on the former Sears Tower in Chicago, in the coming weeks, Bloomberg News reported, citing sources familiar with the matter.

A merger between Aon and Willis Towers, in turn, could pose a major competitive threat to New York-based Marsh & McLennan Cos., currently the world's largest brokerage.

Conversely, Aon's stock price, given its position as the potential buyer, fell more than 3% to $165.43. Shares of Aon have ridden the market rally over the past two months, having fallen to $137.44 on Christmas Eve.

Aon's stock price has outperformed the insurance industry, rising 22% over the past year compared with the 14.6% average for insurers, according to Zacks.

Aon has been growing steadily over the past few years through acquisitions and has maintained a high level of profitability, with its return on equity over 43% compared to the industry average of 24.8%, according to Zacks.