Towers Watson & Co. shareholders should vote against an $8.9 billion merger with Willis Group Holdings Plc even after the insurance broker increased the offer amid a backlash from investors, proxy adviser Glass Lewis & Co. said in a report.
The transaction remains “inappropriately structured” and Towers Watson investors should reject the deal, Glass Lewis said in an updated report published Dec. 2. Glass Lewis and Institutional Shareholder Services had earlier urged Towers Watson investors to reject the initial terms, before both companies agreed to more than double the one-time cash dividend.
Towers Watson saw investors push back after the initial deal, announced in June, valued the consulting firm at about $8.7 billion. Willis is seeking to merge with Towers Watson to compete against diversified rivals including Aon Plc and Marsh & McLennan Cos., and its investors would own about 50.1 percent of the combined company.
“We believe that the relatively small increase in the special cash dividend represents an insufficient improvement and that the merger under the amended terms continues to inadequately compensateTowers Watson shareholders,” Glass Lewis said in the report updated on Dec. 2. “The merger of equals is not structured in a manner which is fair or appropriately attractive for Towers Watson shareholders.”
ISS said in November that the discount Towers Watson shareholders would be accepting under the original terms appeared “excessive,” as Glass Lewis urged investors to seek a better price. In its most recent report, Glass Lewis said that remaining as a standalone company is more attractive forTowers Watson shareholders.
Towers Watson delayed its initial shareholder meeting scheduled for November after it received criticism from investors including Driehaus Capital Management LLC. Later, the firms raised the one-time cash dividend to $10 a share from $4.87 and urged investors to accept the proposal at a new meeting scheduled for Dec. 11.
The consulting firm said in a Nov. 23 letter to investors that it didn’t expect further increases in the pre-merger special dividend. The latest agreement values Towers Watson at about $8.9 billion, based on the closing price for Willis on Nov. 18, the day before new terms were announced.
Towers Watson has touted the deal as a chance to generate cost savings and create a more efficient tax profile, with the combined company domiciled in Ireland. That could save the firm about $75 million annually within two years, the company said Oct. 21 in a letter to investors. Towers Watson Chief Executive Officer John Haley would lead the combined company.