Willis Group, Towers Watson Agree to Merger

June 30, 2015

Global reinsurance and insurance broker Willis Group Holdings and professional services and analytics firm Towers Watson have agreed to an all-stock merger of equals.

Upon completion of the merger, Willis shareholders will own approximately 50.1 percent and Towers Watson shareholders will own approximately 49.9 percent of the combined company.

The combined company will be named Willis Towers Watson and be domiciled in Ireland, where Willis Group moved its place of incorporation, previously Bermuda, in 2010.

Willis Chairman James McCann will be chairman of the combined company, while Towers Watson CEO John Haley will be CEO. Dominic Casserley, current Willis CEO, will be deputy CEO of the merged firm. Haley and Casserley will serve on the board, along with six Willis directors and six from Towers Watson. Towers Watson’s Roger Millay will be chief financial officer.

The transaction has been unanimously approved by the board of directors of each company.

The combination brings together two complementary businesses to create a global advisory and brokerage firm. Towers Watson offers advisory services in benefits, human resources, risk and financial services. It runs a middle-market health and benefits exchange platform called OneExchange that Willis already sells to its customers as Willis Advantage under a “white label” agreement and that both firms believe is poised for growth.

Willis brokers reinsurance and property/casualty insurance and offers underwriting, human resources and benefits services globally.

The combined company will have approximately 39,000 employees in more than 120 countries, and revenue of approximately $8.2 billion. Willis has about $3.8 billion in revenue as of Dec. 31, 2014, while Towers Watson reported $3.5 billion as of June 30, 2014.

The announcement said the combination is expected to result in $100-125 million in cost savings within three years of closing, primarily related to the elimination of duplicate costs and economies of scale, in addition to increased efficiencies. Ireland’s 25 percent tax rate will contribute to savings over the 34 percent Towers Watson said it pays; however the deal was not driven by this tax advantage, officials said.

The firms see Towers Watson’s relationships helping to increase Willis’ penetration in the large U.S. property/casualty insurance corporate market and Willis helping expand Towers Watson’s business internationally.

“The rationale for the merger is powerful – at one stroke, the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients,” said Dominic Casserley, Willis CEO, said. “Together we will help our clients achieve superior performance through effective risk, people and financial management.”

He said the combined firm will advise 80 percent of the world’s top-1000 companies, as well as have a significant presence with mid-market and smaller employers around the world.

Towers Watson CEO Haley said the deal will also mean savings for middle-market clients and increased development opportunities for employees.

Casserley and Gene Wickes from Towers Watson have been chosen to oversee the integration.

Under Casserley, who left the consulting firm McKinsey to become Willis CEO in January 2013, Willis has been growing globally. Last month, it completed a deal for a majority interest in London wholesale broker Miller Insurance Services. In April, Willis offered to buy the 70 percent of Gras Savoye that it didn’t already own to expand in France, Eastern Europe and the Middle East. That deal is still pending. Also, in October of last year Willis invested $205 million in Swedish personal lines broker Max Matthiessen.

At the same time that it has been acquiring, Willis has been cutting expenses by laying off and relocating employees.

The transaction is expected to close by Dec. 31, 2015, subject to customary closing conditions, including regulatory approvals, and approval by both Willis and Towers Watson shareholders.

Yesterday, Willis announced that Deputy CEO Steve Hearn was leaving to become CEO at Cooper Gay Swett & Crawford at the beginning of November. Willis said Hearn was the only other executive who knew about the merger and he was supportive.

Last month, Peter Hearn, chairman of Willis Re, left to join Guy Carpenter as its CEO beginning in May 2016.

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