LONDON—Insurance broker and risk advisory firm Willis Group Holdings and professional services group Towers Watson on Tuesday said they had agreed to an all-stock merger that values the combined company at $18 billion.
Under the deal, which has been approved by both boards, Towers Watson shareholders will get 2.6490 Willis shares for each share held as well as a one-time cash dividend of $4.87 a share.
Willis Group shareholders will own 50.1% of the combined group and Towers Watson shareholders will own the rest.
The combined company, to be named Willis Towers Watson, will have 39,000 employees in more than 120 countries and revenue of about $8.2 billion.
Willis Chairman James McCann will be chairman of the combined company and Towers Watson Chairman and Chief Executive John Haley will be its CEO. Willis CEO Dominic Casserley will be president and deputy CEO of the combined company. Its board will consist of six directors from each company. Towers Watson’s chief financial officer,Roger Millay, will be CFO.
Tax Gap at Work in Willis Deal. Insurance broker Willis is the latest foreign company to go shopping stateside, agreeing today to buy consulting firm Towers Watson. Ireland-domiciled Willis is projecting $100 million to $125 million in savings in three years, a large chunk of which will come from spreading its lower tax rate over Towers Watson’s income. Willis averaged a 23% tax rate over the past three years, versus 31% for Towers Watson. The combined company expects a blended rate in the mid-20s, which would save $30m at the midpoint based on Towers Watson’s 2014 pretax income. Other similar deals include Valeant buying North Carolina-based Salix and Actavis buying California’s Allergan, and show the financial edge foreign buyers enjoy in pursuing U.S. targets. (firstname.lastname@example.org; @lizrhoffman)
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The companies said in a statement that the merged company is expected to achieve cost synergies of $100 million to $125 million within three years of the deal closing, as well as greater corporate efficiencies.
“We see numerous opportunities to enhance our growth profile by offering integrated solutions that leverage Willis’ global distribution network and superb risk advisory and reinsurance broking capabilities to deliver a more robust set of analytics and product solutions across a broader client base,” Mr. Haley said.
Willis Towers Watson will maintain its domicile in Ireland and have a significant presence in major markets around the world.
The deal is expected to close by the end of this year.