Towers Watson and Willis To Merge

The professional-services firm and insurance broker will join in an $18 billion deal creating a company with more than $7 billion in revenue.
Katie Kuehner-HebertJune 30, 2015

Insurance broker and risk adviser Willis Group Holdings and and professional-services firm Towers Watson announced plans to combine in a $18 billion deal dubbed as a “merger of equals.” The phrase is a euphemism of sorts, though, because Willis shareholders would own 50.1% and Towers Watson shareholders 49.9% of the new entity, to be named Willis Towers Watson.

The combination, subject to approval by regulators and both firms’ shareholders, would create an “integrated global advisory, broking, and solutions provider to serve a broad range of clients in existing and new business lines,” the two firms said Tuesday in a joint press release. The combined company would have roughly 39,000 employees in more than 120 countries, and pro forma revenue of approximately $8.2 billion and adjusted earnings of more than $1.7 billion for the 12 months ended Dec. 31, 2014.

“We see 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, including accelerating penetration of our Exchange Solutions platform into the fast growing middle-market,” Towers Watson chairman and chief executive John Haley said.

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Willis CEO Dominic Casserley said the combined company would advise more than 80% of the world’s 1,000 largest companies, as well as have a significant presence with mid-market and smaller employers around the world.

The deal would enable Willis to further penetrate the large U.S. property and casualty insurance brokerage corporate market, and accelerate the international growth of Towers Watson and Willis’ respective private health-insurance exchanges, particularly within the middle market. The combination is expected to result in $100 million 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.

Founded in 1828, Willis is legally based in Ireland and maintains its executive headquarters in London, according to a New York Times article Tuesday. The company posted revenue of $3.8 billion for 2014 and employs more than 22,500 people worldwide.

Towers Watson was formed in 2010 by the merger of Towers, Perrin, Forster & Crosby and Watson Wyatt Worldwide, but it traces its roots to 1865, the Times said. It provides a variety of professional services, including human resources management, risk consulting, and compensation advisory services. Towers Watson posted revenue of $3.5 billion for 2014 and employs about 16,000 people.

Under the deal’s terms, Towers Watson shareholders would receive 2.649 Willis shares for each Towers Watson share. They would also get a one-time cash dividend of $4.87 per Towers Watson share pre-closing.

Subject to Willis shareholders’ approval, Willis expects to implement a 2.649-for-one reverse stock split, so that each one Willis share would be converted into 0.3775 Willis Towers Watson shares. If the reverse stock split is approved, Towers Watson shareholders would 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.

Upon closing of the transaction, current Willis chairman James McCann would be the combined firm’s chairman, Haley would be CEO, Willis chief executive Dominic Casserley would be president and deputy CEO, and Towers Watson finance chief Roger Millay would be CFO. The new company’s board would consist of 12 directors, 6 nominated by Willis and six by Towers Watson, including the firms’ current CEOs.