Towers Watson and Willis Group to Merge

A newly announced merger between Towers Watson and Willis Group carries an implied equity value of approximately $18 billion, while business leaders across the firms hope to achieve $100 to $125 million in cost cuts and new efficiencies.

The merger announcement quickly made waves across the investment and financial services press after the companies confirmed the pending deal, under which they “will combine in an all-stock merger of equals transaction.” The current deal valuation is based on the closing common stock prices of Willis and Towers Watson on June 29 and could drift as the deal moves ahead.

The firms note the transaction has already been unanimously approved by the board of directors of each company. The combined company will be named Willis Towers Watson. Upon completion of the merger, Willis shareholders will own approximately 50.1% and Towers Watson shareholders will own approximately 49.9% of the combined company on a fully diluted basis.

According to the firms, the combination “brings together two highly complementary businesses” to create an integrated global advisory, brokerage and solutions provider to serve a broad range of clients in existing and new business lines. The combined company will have approximately 39,000 employees in more than 120 countries, and pro forma revenue of approximately $8.2 billion.

John Haley, chairman and chief executive officer of Towers Watson, says he sees “numerous opportunities to enhance our growth profile by offering integrated solutions that leverage Willis’ global distribution network and superb risk advisory and re/insurance broking capabilities to deliver a more robust set of analytics and product solutions across a broader client base.”

Haley further anticipates success “accelerating penetration of our Exchange Solutions platform into the fast growing middle-market.”

Dominic Casserley, Willis CEO, observes that the combined entity “will advise over 80% of the world’s top-1000 companies” while maintaining a strong presence with mid-market and smaller employers around the world. 

Neither firm immediately returned calls for comment on how the deal will specifically impact U.S. retirement plan clients of Towers Watson, but the deal has a lot of anticipated implications for the way each firm does business and serves clients. One objective clearly highlighted by the firms' investor presentation explaining the thinking behind the deal is improved incremental growth opportunity developed through an “increased ability to rely upon Towers Watson’s relationships to increase Willis’ penetration in the large U.S. P&C corporate market.”

Business leaders further hope the deal will provide “significant opportunity to accelerate growth in the exchange market by bringing Towers Watson’s best-in-class Exchange Solutions offering to Willis’ significant middle-market relationships.”

Beyond these points, the firms expect the combined Willis Towers Watson company will be able to realize $100 to $125 million in cost savings, “to be fully realized within three years of closing, primarily related to the elimination of duplicate corporate costs and economies of scale, in addition to increased efficiencies.”

Pursuant to the terms of the merger, Towers Watson shareholders will receive 2.6490 Willis shares for each Towers Watson share. Towers Watson shareholders will also receive a one-time cash dividend of $4.87 per Towers Watson share pre-closing. Subject to Willis shareholder approval, Willis expects to implement a 2.6490 for one reverse stock split, so that each one Willis share will be converted into 0.3775 Willis Towers Watson shares. If the reverse stock split is approved, Towers Watson shareholders will receive one share of Willis Towers Watson for each Towers Watson share. The merger is not conditioned on Willis shareholder approval of the reverse stock split, according to the firms.

Upon closing of the transaction, James McCann will become chairman of the combined company, while Haley will be CEO and Casserley will be president and deputy CEO. The new company’s board will consist of 12 directors in total—six to be nominated by Willis and six by Towers Watson, including Towers Watson’s and Willis’ current CEOs. Additionally, Roger Millay will be CFO, according to the firms, while Casserley and Gene Wickes from Towers Watson have been chosen to oversee the integration team.

After closing, the combined company will maintain its domicile in Ireland and significant presence in major markets around the world. The transaction is expected to close by December 31, subject to customary closing conditions, including regulatory approvals, and approval by both Willis and Towers Watson shareholders.