Towers Watson investors are hoping to derail the planned $18 billion merger with global broker Willis by taking legal action, alleging company directors are breaking their fiduciary duties with the transaction.
The proposed deal would bring in projected revenues of $8.2 billion and generate between $100 million and $125 million in savings, according to company leaders. Under terms of the agreement, Willis Chairman James McCann will serve as chairman of the new firm, called Willis Towers Watson, while Towers Watson Chairman and Chief Executive John Haley will serve as CEO.
Stockholers with the professional services group are hoping to prevent that from happening, however.
Willis revealed in its quarterly earnings report that Towers Watson investors have filed two lawsuits against the company, claiming that “Towers Watson’s directors breached their fiduciary duties to Towers Watson stockholders by agreeing to merge Towers Watson with Willis.”
The complaint says that under terms of the agreement, Towers Watson shareholders will own just 49.9% of the combined company – a tradeoff they consider unfair.
“The investigation concerns whether the Board of Towers Watson breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Willis is underpaying for Towers Watson,” wrote attorneys with Levi & Korsinsky LLP.
Shareholders also say Towers Watson is by far the more successful of the two companies, having watched stock return triple what Willis has since 2012. Furthermore, Willis’ status as a broker exposes it to the problems of rising interest rates and falling premiums due to a soft market.
Operating income at Willis even fell 3% in 2014 to $67 million, while operating profits dropped 10% during the first quarter of this year.
“A look at the structure and timing of Tuesday’s deal indicates that Towers Watson shareholders may be leaving a lot on the table, and entering a transaction with significant strategic risks, all for the benefit of revenue synergies and the tax savings that would come from shifting its corporate tax headquarters to London,” wrote Forbes columnist Antoine Gara.
Willis, Towers Watson and directors of both companies were named as defendants in the class action suits, which were filed in Delaware state court.
Undisturbed, the all-stock deal between the two firms is expected to close by the end of the year.
