(Bloomberg) -- Towers Watson & Co. investors should reject a planned merger with insurance broker Willis Group Holdings Plc, proxy advisers Institutional Shareholder Services and Glass Lewis & Co. said. Willis declined the most since August in New York trading.
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 late Thursday. Shares of Towers Watson had dropped when the deal was announced in June.
Both companies’ investors are scheduled to vote on the deal Nov. 18. Willis agreed to merge with Towers Watson in an $8.7 billion transaction to add consulting operations, helping it compete against diversified insurance-broker rivals Aon Plc and Marsh & McLennan Cos. Willis investors would own 50.1% of the combined company, to be domiciled in Ireland and led by Towers Watson CEO John Haley. Towers Watson holders would get 2.649 Willis shares and a one-time cash dividend of $4.87 for each share they own.
“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.
‘Revenue synergies’
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 in a statement that the recommendation “neglects the estimated $4.7 billion in incremental value for shareholders that we expect through clearly identified cost, tax and revenue synergies.”
Willis dropped $1.32, or 2.9%, at 11:25 a.m. Towers Watson slipped 1.1% to $127.79, compared with the closing price of $137.98 the day before the deal was announced.
Towers Watson stakeholders including Driehaus Capital Management LLC, which owns more than 1 million shares, have said they’re planning to vote against the proposed deal, and that the consulting company’s quarterly results, announced Monday, 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 in a phone interview Friday. “It’s not in the best interest of shareholders to sell at a 9 percent discount to market value for a company that is exceeding expectations and that is doing quite well.”
‘Value proposition’
In a separate report, Glass Lewis recommended that Willis holders vote for the merger, saying that the deal would help the business diversify.
“If the envisioned synergies are realized to the full extent expected, we believe the deal would indeed prove to be a favorable value proposition for Willis,” the proxy adviser said.
--With assistance from Colin Keatinge in Tokyo.
Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
