(Bloomberg) Willis Group Holdings Plc, the third-largest insurance broker, agreed to better terms for Towers Watson & Co. shareholders in a proposed merger after the consulting firm’s investors said that a June agreement was inadequate.
The one-time cash dividend will be $10 a share, compared with $4.87 under the previous offer, Towers Watson said in a statement Thursday. The latest agreement values the consulting firm at about $8.9 billion, based on Wednesday’s closing price for Willis.
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The consulting firm had postponed a shareholder vote that was scheduled for Nov. 18 amid opposition from some proxy-advisory firms and investors to the deal, which was valued at about $8.7 billion when it was announced on June 30. Towers Watson shares fell 8.8 percent that day, and investor Driehaus Capital Management LLC later faulted the accord as a “takeunder.” A vote on the new terms will occur by Dec. 16, Arlington, Va.-based Towers Watson said.
“Towers Watson shareholders are upset, and I can totally understand that,” Darren Marcus, an analyst at MKM Partners, said in a phone interview before the terms were changed. “With that said, I think the deal, in a lot of ways, makes sense.”
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Under terms of the June agreement, Towers Watson Chief Executive Officer John Haley would retain that post for the combined company, and Willis’s stockholders would hold about 50.1%. The companies said a merger would increase shareholder value by about $4.7 billion because of cost savings, opportunities for increased revenue and tax savings. London-based Willis enjoys lower rates than U.S. companies.
Not Taken Lightly
Willis CEO Dominic Casserley said that the increased dividend would allow Towers Watson shareholders to have another $357.4 million before his shareholders take their stake in the consulting firm. And he described that as an acceptable cost, given the benefits.
“This is not a decision that we take lightly,” he said in a separate statement.
Willis gained 1% to $45.11 at 9:46 a.m. in New York trading. Towers Watson climbed 1.1% to $130.60. That compares with $137.98 on the day before the initial deal was announced.
Health Insurance
Willis is seeking Towers Watson to better compete with larger insurance brokers Marsh & McLennan Cos. and Aon Plc, which also have substantial consulting operations. Marcus said that Towers Watson’s push into employer-based health insurance exchanges could make it a good fit with Willis.
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The broker agreed in June to pay investors 2.649 Willis shares and a one-time cash dividend of $4.87 for each Towers Watson share they own. Towers Watson said the terms were based partly on 60-day stock averages through the end of May and that its main focus was on the company’s long-range prospects.
“We think this revision will satisfy enough TW shareholders for ultimate approval,” Meyer Shields, an analyst with Keefe Bruyette & Woods, said in a note, using the companies’ ticker symbols. “We also expect WSH shareholders to approve the revised deal, given the very significant potential synergies.”