Sunday 18 August 2019

Reject $8.7bn Willis Irish deal, Towers Watson investors told

Towers Watson chief executive John Haley
Towers Watson chief executive John Haley

Katherine Chiglinsky

Towers Watson investors should reject a planned Irish merger with insurance broker Willis Group Holdings, proxy advisers Institutional Shareholder Services and Glass Lewis & Co said.

The consulting firm's holders should seek improved merger terms, or "the better option at this time is to remain a standalone company," Glass Lewis said in its report issued late on Thursday. Shares of Towers Watson had dropped when the deal was announced in June.

Shareholders in both companies are scheduled to vote on the deal on November 18. Willis agreed to merge with Towers Watson in an $8.7bn transaction to add consulting operations, helping it compete against diversified rivals Aon and Marsh & McLennan. Willis investors would own 50.1pc of the combined company, to be domiciled in Ireland and led by Towers Watson CEO John Haley.

"Although Towers shareholders might be willing to forgo a premium in exchange for the potential benefits of this transaction, the magnitude of the discount they are being asked to accept appears excessive," ISS said in its report.

Towers Watson disagrees with the advisers because they focus on short-term trading and discount the "significant" long-term value creation potential of the merger, the company said on Friday. London-based Willis said that the recommendation "neglects the estimated $4.7bn in incremental value for shareholders that we expect through clearly identified cost, tax and revenue synergies."

Towers Watson stakeholders including Driehaus Capital Management, which owns more than one million shares, have said they're planning to vote against the proposed deal, and that the consulting company's recent quarterly results, highlight its prospects as an independent firm.

"They came out with fantastic earnings that handily exceeded market expectations," Matthew Schoenfeld, an assistant portfolio manager at Driehaus, said. "It's not in the best interest of shareholders to sell at a 9pc discount to market value for a company that is exceeding expectations and that is doing quite well."

In a separate report, Glass Lewis recommended Willis holders vote for the merger, saying that the deal would help the business diversify.

"If the envisioned synergies are realised to the full extent expected, we believe the deal would indeed prove to be a favourable value proposition for Willis," the proxy adviser said.

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