With just days to go before the crucial vote on the US$18 billion merger of global asset consultant Towers Watson and big insurance broker Willis, doubt has been cast over the result. The two largest proxy voting firms and at least one fund manager are urging a ‘no’ vote.
The vote, on November 18 (US eastern time) in Miami, Florida, is of the Towers Watson shareholders – Towers being a NASDAQ-listed company since its previous merger between the old Watson Wyatt and Towers Perrin. Willis shareholders – whose company is NYSE listed – will own 50.1 per cent of a merged group under the current proposal.
Shareholders and their advisors went public last week with a slanging match between the ‘yes’ and ‘no’ camps. Towers Watson has reaffirmed its commitment to the deal, which will form the third-largest investment and insurance advisory and financial product company in the world.
The proxy-vote agencies Institutional Shareholder Services (ISS) and Glass, Lewis & Co recommended voters reject the offer, as did fund manager Driehaus Capital. “Although the potential long-term benefits of the deal appear compelling, it is not at all clear that realizing those opportunities necessitates taking a steep discount,” ISS stated in a report. Asset International, an investment media group, reported that ISS critiqued Towers for negotiating exclusively with Willis as opposed to putting itself in play for other bids.
Towers shot back the next day, Asset International reported. The proxy advisors, it argued, “focus on short-term trading, take a narrow view of relative value contribution, and unduly discount the significant long-term value creation potential of the proposed merger with Willis.”
Meanwhile, activist fund manager ValueAct took aim at Driehaus Capital’s assessment that the merger arrangements were “value destructive”. ValueAct said: “It is a shame that ISS could cause the dissolution of a deal that even it doesn’t dispute should be highly accretive to both sets of stockholders over a multi-year time horizon… The suggestion that the Towers Watson board did not do its job in exploring a quick-hit cash premium rings hollow.” ValueAct accused ISS of “bumpitrage”, which is an attempt to get a short-term stock price bump rather than longer-term value.
Smaller proxy-vote advisors Proxy Mosaic and Egan-Jones announced last week they had recommended clients vote in favour of the merger.
* Greg Bright is publisher of Investor Strategy News (Australia