Community Corner

Watson Wyatt, Towers Perrin in $3.5 Billion Merger

30 June 2009
By Rob Williams
Published: 29 June 2009

June 28 (Bloomberg) -- Towers, Perrin, Forster & Crosby Inc. and Watson Wyatt Worldwide Inc. agreed to merge in an all- stock transaction valued at $3.5 billion.

The benefits-consulting firms will form a publicly traded company called Towers Watson & Co., whose stock will be divided equally between Watson Wyatt shareholders and employees of closely held Towers Perrin. The combined company will have annual revenue of more than $3 billion.

“We see the two organizations fitting together like pieces of a jigsaw puzzle,” Watson Wyatt Chief Executive Officer John Haley said in an interview. He will have the same title at the merged company, while Mark Mactas, chief executive of Stamford, Connecticut-based Towers Perrin, will be president.

They expect one-time costs of $80 million from the merger, followed by savings of $80 million over the next three years amid layoffs and the streamlining of overlapping operations. Towers Watson will have 14,000 employees upon the closing of the transaction, which is expected to occur in the fourth quarter. The companies are looking for a new headquarters in the northeastern U.S., Haley said.

They will have a conference call at 8:30 a.m. New York time tomorrow to discuss the transaction.

Earnings Outlook

Watson Wyatt, based in Arlington, Virginia, expects revenue of $1.65 billion to $1.67 billion and earnings per diluted share of $3.35 to $3.40 for the fiscal year ending June 30. Analysts expect the company to earn $3.39 a share, according to data compiled by Bloomberg.

The company reported earnings of $3.50 a share in the previous fiscal year on revenue of $1.76 billion.

Watson Wyatt declined 14 percent this year through June 26 to $41.18, compared with a 1.7 percent gain in the Standard & Poor’s 500 Index.

Goldman, Sachs & Co. was financial adviser and Milbank, Tweed, Hadley & McCloy LLP was legal adviser to Towers Perrin on the transaction. Banc of America Merrill Lynch Securities was financial adviser and Gibson, Dunn & Crutcher LLP was legal adviser to Watson Wyatt.

To contact the reporter on this story: Rob Williams in New York

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