Insurance broker and risk advisory firm Willis Group Holdings plc (WSH) and financial services provider Towers Watson & Co. (TW) have agreed to an all-stock merger, the two companies said Tuesday. The transaction will create an $18 billion global advisory, broking and solutions firm.
Under the "merger of equals" transaction, Towers Watson shareholders will receive 2.6490 Willis shares for each Towers Watson share they own, and also receive a one-time cash dividend of $4.87 per share pre-closing.
Subject to approval by its shareholders, 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 held by them. However, the merger is not conditioned on approval by Willis shareholders of the reverse stock split.
The board of directors of both companies have approved the transaction. The combined company will be named Willis Towers Watson.
Upon completion of the merger, Willis shareholders will own about 50.1 percent of the combined company, while Towers Watson shareholders will own the remaining 49.9 percent stake.
Willis said that its shareholder, ValueAct Capital, which owns about 10.3 percent of its common stock, has agreed to vote its shares in favor of the transaction.
The transaction, subject to approval by both Willis and Towers Watson shareholders, is expected to close by December 31, 2015.
The combined company will have about 39,000 employees in over 120 countries, pro forma revenue of about $8.2 billion and adjusted/underlying EBITDA of over $1.7 billion for the twelve months ended December 31, 2014.
The two companies expect the combination to result in cost savings of $100 million to $125 million to be fully realized within three years of closing. The cost savings will be primarily related to the elimination of duplicate corporate costs and economies of scale, in addition to increased efficiencies.
Upon closing of the transaction, Willis Chairman James McCann will become chairman of the combined company, while John Haley will be CEO, and Willis CEO Dominic Casserley will be president and deputy CEO.
The new company's board will consist of 12 directors, with six nominated by each company, including Towers Watson's and Willis' current CEOs. Additionally, Towers Watson CFO Roger Millay will be CFO of the combined company.
After closing of the deal, the combined company will be domiciled in Ireland and have a significant presence in major markets around the world.
TW closed Monday's trading at $137.98. In Tuesday's pre-market activity, the stock is down $0.98 or 0.71 percent to $137.00.
WSH closed Monday's trading at $45.40. In Tuesday's pre-market activity, the stock is up $3.75 or 8.26 percent to $49.15.
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