Willis ‘Disappointed’ that Tower Watson Shareholders Advised to Reject Merger

November 9, 2015

Willis Group Holdings plc said it was “disappointed” that Institutional Shareholder Services last week recommended Tower Watson shareholders reject the proposed merger with Willis.

“[W]e are disappointed with their conclusion that Towers Watson shareholders should not support the merger. We believe that this perspective neglects the estimated $4.7 billion in incremental value for shareholders that we expect through clearly-identified cost, tax and revenue synergies,” said Dominic Casserley, chief executive officer of Willis, in a statement issued by the company.

“We remain convinced that the merger is in the best interests of both sets of shareholders and represents value creation that neither company could realize on its own,” said Casserley. “The Willis board of directors continues to recommend that shareholders vote for all proposals at the upcoming extraordinary general meeting.”

Conversely, ISS recommended that Willis shareholders vote for the transaction. “Naturally we are pleased that ISS recognizes the ‘strategic merits and long-term benefits of the merger,'” Casserley added.

Willis discussed ISS’ reports relating to Willis shareholders, which “acknowledges the strategic benefits, cost synergies and value creating potential of the deal.” Highlights quoted were:

  • Given the “strategic rationale for the transaction, the positive market reaction of Willis shares, and the expected cost savings as a result of the merger, a vote FOR this proposal is warranted.”
  • “The combined company would also present a growth opportunity for Willis’ existing insurance business into larger North American companies.”
  • “The potential long-term benefits of the deal appear compelling…”
  • “A combined entity would benefit from certain factors, including cost synergies and the potential revenue opportunity of better mating Towers’ healthcare exchange with Willis’ distribution network.”
  • “Integrating the [exchange] product with a powerful distribution system is more critical than a backward-looking analysis of growth rates can convey.”

Willis said the merger of the two companies is expected to generate $375-$675 million in incremental revenues “through expanded distribution of Towers Watson’s healthcare exchange, expansion of Willis’ large market P&C brokerage business, and further globalization of Towers Watson’s health and group benefits consulting business, all through opportunities that only this merger can create.”

The broker went on to say that the two companies “expect $125 million in annual merger related cost savings and approximately $75 million in annual tax savings.”

“These revenue and cost synergies are incremental to any cost savings expected from Willis’s Operational Improvement Program, which is on pace to deliver$325 million in annual savings by 2018,” the company continued.

Willis will hold an extraordinary general meeting of its stockholders to vote on the proposed merger with Towers Watson at 9:30 a.m. on November 18, 2015 at the Pierre Hotel in New York City. Willis stockholders of record as of the close of business on October 2, 2015 will be entitled to vote at the meeting.

Source: Willis Group Holdings

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