The proposed deal has Towers Watson shareholders receiving 2.649 Willis shares plus a onetime, $4.87 cash dividend for each Towers Watson share preclosing.
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The new company will be called Willis Towers Watson, with Willis shareholders owning 50.1% of the new firm. Aggregate revenue is said to be $8.2 billion.
Casserley is eligible for the payment when he resigns as CEO of Willis because he’s not the most senior executive at the combined company, according to the terms of his employment agreement in Willis’s April 17 proxy filing. A look at the structure and timing of Tuesday’s deal indicates that Towers Watson shareholders may be leaving a lot on the table, and entering a transaction with significant strategic risks, all for the benefit of transforming into an insurance the tax savings that would come from shifting its corporate tax headquarters to London, where Willis is based. Barclays PLC analyst Jay Gelb said the company “appears to be extracting more value from the transaction than” Towers Watson. The merger is said to create a combined value of $18 billion. The recent deal with Towers Watson, announced today, is in line with the moves in the industry where property and casualty insurers consolidate as competition increases and rates fall.
Executives of both Willis and Towers Watson on Tuesday were quick to play down the tax benefits, stressing the business rationale for joining Willis, a 187-year-old insurance brokerage, with Towers Watson, a big player in human resources and actuarial consulting. 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.
The merger has been unanimously approved by the Board of Directors of each company.
Domiciled in Ireland, the combined company will house around 39,000 employees in over 120 countries. In addition to providing an enhanced worldwide profile and delivering corporate efficiencies, the merger is expected to generate cost synergies of $100-125 million within three years.
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Such a large merger is likely to bring with it some level of uncertainty among other brokers and the staff of both Willis and Towers Watson.
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The result will be an $18 billion firm named Willis Towers Watson with operations across the insurance, reinsurance and professional services and advisory space.
