Watson Wyatt U.K., U.S. to Combine

January 19, 2005

Watson Wyatt & Company, the principal subsidiary of Watson Wyatt & Company Holdings and the London-based Watson Wyatt LLP announced the signing of a letter of intent to combine the two firms.

“Watson Wyatt & Company currently owns approximately 20 percent of Watson Wyatt LLP and will acquire the remaining assets of Watson Wyatt LLP for a purchase price of approximately $451 million in cash and stock,” said the bulletin. “The combined organization will have estimated revenues of more than $1.1 billion and will include more than 6,000 associates in 88 offices in 30 countries.”

The announcement explained that the “two firms have successfully operated an alliance as Watson Wyatt Worldwide since 1995, offering human capital and financial management consulting services to clients globally. U.K.-based Watson Wyatt LLP had revenues of approximately $436 million for its fiscal year that ended April 30, 2004.” It also indicated that the proposed transaction “would further strengthen Watson Wyatt’s global leadership position and is expected to increase long-term profitability, growth and stockholder value,” and is expected to increase earnings.

“We are delighted to take our alliance to the next level by combining our businesses,” stated John Haley, president and CEO of Watson Wyatt & Company. “Our clients are growing more global every day. We can better meet their needs by fully integrating our resources and expertise and by investing as a single firm. Watson Wyatt Worldwide has unmatched global strengths, and joining together underscores our commitment to our global brand and infrastructure.”

Paul Thornton, the senior partner of Watson Wyatt LLP, commented: “The decision to combine represents a natural progression in our 10-year alliance. Through this transaction, we expect Watson Wyatt Worldwide to become even more aligned, efficient and nimble when it comes to serving our clients. It also opens up new opportunities for growth across geographies and service lines.”

The bulletin indicated that the “purchase price of approximately $451 million would be paid through the issuance of approximately 11 million shares of Watson Wyatt & Company Holdings common stock and cash of approximately $158 million, using existing cash reserves and borrowings. Approximately $50 million of the stock portion of the purchase price is contingent upon the European operation’s ability to meet specified performance targets by June 30, 2007.”

It also added that the “letter of intent is non-binding and the transaction is subject to a number of conditions, including the signing of a definitive agreement, approval by stockholders of Watson Wyatt & Company Holdings and by the voting partners of Watson Wyatt LLP, regulatory review and customary closing conditions. The transaction is currently scheduled to close on or before the end of Watson Wyatt & Company’s fiscal year on June 30, 2005.”

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