There have been at least three shareholder lawsuits filed over the mega-deal that would have insurance broker Aon acquire rival Willis Towers Watson. The suits allege that Willis and its directors breached their fiduciary duties under U.S. securities laws by filing incomplete and misleading information with the Securities and Exchange Commission on the transaction.
Also, one New York law firm has begun an investigation into whether the agreed-upon selling price is in shareholders’ best interests.
On March 9, 2020, Willis entered into an agreement and plan of merger under which Willis Towers Watson shareholders stand to receive 1.08 Class A ordinary shares of Aon for each share of Willis Towers stock they own. Upon completion of the proposed combination, existing Aon shareholders will own approximately 63 percent and existing WTW shareholders will own approximately 37 percent of the combined company on a fully diluted basis.
The companies said the all-stock deal had an implied combined equity value of approximately $80 billion.
The court complaints, brought against Willis and its directors who unanimously agreed to the transaction with Aon, allege that the proxy statement filed with the SEC violates U.S. securities law because it provides incomplete and misleading information including information concerning the company’s financial projections and analysis, on which Willis directors relied to recommend the proposed transaction as fair to Willis Towers shareholders.
On May 14, lawyers from Rigrodsky & Long sued in the U.S. District Court for the District of Delaware. The class action complaint alleges that the proxy statement failed to disclose, for each set of financial projections: all line items used to calculate adjusted EBITDA, unlevered free cash flow, adjusted net income, levered free cash flow, and adjusted earnings per share; and a reconciliation of all non-GAAP to GAAP metrics.
The New York law firm Faruqi & Faruqi also filed a class action in federal district court in New York on May 19 seeking to enjoin completion of the proposed merger “unless and until the company discloses the material information… which has been omitted from the proxy” along with unspecified damages and legal costs.
“While touting the fairness of the merger consideration to the company’s shareholders in the proxy, defendants have failed to disclose certain material information that is necessary for shareholders to properly assess the fairness of the proposed transaction, thereby violating SEC rules and regulations and rendering certain statements in the proxy materially incomplete and misleading,” says the Faruqi & Faruqi complaint.
Last week, New York-based investor rights firm Halper Sadeh said it has also filed a class action alleging that Willis issued a materially misleading proxy statement.
Last month, the firm of Wolf Haldenstein Adler Freeman & Herz brought suit on behalf of individual stockholder Shiva Stein in the U.S. District Court for the Southern District of New York. This complaint says the SEC filings were missing financial projections that the companies provided to directors and thereby deprived stockholders of information they needed to decide whether to support the deal. The complaint says financial advisor Goldman Sachs provided the financial analyses but does not name the firm as a defendant.
Another firm, Bragar Eagel & Squire, said it has “launched an investigation.” The firm said it is “concerned that Willis Tower Watson’s board of directors oversaw an unfair process and ultimately agreed to an inadequate deal price.”
The transaction is subject to the approval of the shareholders of both Aon Ireland and Willis Towers Watson, as well as regulatory approvals. Both firms are domiciled in Ireland and have headquarters in London. The brokers expect the acquisition to be completed in the first half of 2021.
Aon and Willis are the second- and third-largest insurance brokers by revenue. If the deal is approved, the combined company, named Aon, will have more than $20 billion in revenue. Aon reported $11 billion in revenue with $2.2 billion net income for 2019 compared to $9 billion revenue and $1.4 billion net income for Willis Towers Watson.
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