Towers Watson & Co said it adjourned a shareholder meeting on Wednesday after failing to muster enough support for its $18 billion merger with insurance broker Willis Group Holdings in a move suggesting a raised offer may be in the works.
Towers Watson said it now plans to reconvene the shareholder meeting on Friday. That gives it time to examine whether it can work with Willis to raise the proposed special dividend to entice Towers Watson shareholders to support the deal.
Under terms struck in June, Willis investors would own 50.1 percent of the combined company while Towers Watson holders would get 2.649 Willis shares and a one-time cash dividend of $4.87 for each share they own. Towers Watson CEO John Haley was set to lead the combined company, with James McCann of Willis serving as chairman.
The delay of the vote allows the prospective merger partners to mull an increase in the price shareholders could receive. Though they did not receive the votes, the sides decided to postpone the meeting versus scuttle the deal on Wednesday morning.
According to people familiar with the matter who spoke on condition of anonymity, raising the special dividend was the main focus to salvage the deal. Whether that requires a bump of an extra $3 to $5 or more to the $4.87 dividend will play out over the ensuing days, as the companies’ management teams and shareholders mull the next move.
Shares of Towers Watson, the stronger of the two companies, fell immediately after the deal was announced in June, and have been down as much as 13 percent in the months following the announcement. Starting last month, the structure of the agreement came under increased scrutiny, particularly from Towers shareholder Driehaus Capital Management.
A key goal of the merger is to have Willis, the world’s third-largest insurance broker, combine with Towers Watson to add consulting operations and help take on bigger rivals.
Proxy advisory firms recommended that shareholders vote against the proposed merger, with ISS citing the long-term benefits of the deal but pointing out that it valued Towers Watson at a 9 percent discount.
The failure to win the vote on Wednesday is another blow to activist investor ValueAct Capital, Willis’ second-largest shareholder, which has suffered several setbacks in the last two months. The most prominent was the scrutiny surrounding drug maker Valeant Pharmaceuticals, whose shares have plunged since accounting concerns involving the company arose last month.
The Towers Watson merger with Willis was a deal that ValueAct worked hard to construct, and one that ValueAct’s CEO Jeffrey Ubben lobbied intensely for shareholders to approve.