Based on the closing price of Watson Wyatt common stock on June 26, 2009, the implied equity value of the transaction is approximately $3.5 billion. Watson Wyatt CEO John Haley will serve the combined company as CEO; Towers Perrin CEO Mark Mactas will serve as president.
“The combination of Towers Perrin and Watson Wyatt into Towers Watson will create one of the world’s leading professional services firms, well positioned for sustained growth and profitability across all geographies and business segments,”Haley says. “The combination will further strengthen our core service lines while offering our clients an enhanced portfolio of proven offerings across a range of financial, risk and people management areas. Towers Watson will have tremendous global reach and service breadth to meet the growing needs of the world’s largest multinational corporations. As we provide more value for our clients, we in turn create value for our people and our shareholders.”
Towers Watson, which is expected to have annual revenues in excess of $3 billion, will benefit from the scale of the combined companies and anticipates approximately $80 million in pretax annual synergies. While significant savings are expected during the first two years following completion of the transaction, it is anticipated that full realization of synergies will take three years and cost approximately $80 million.
Towers Watson will also have significant non-cash expenses during the first two years following completion of the transaction. The transaction is expected to be accretive to diluted earnings per share within three years following the consummation of the transaction.
The new company will operate within four geographic regions: North America, EMEA (Europe, Middle East and Africa), Asia-Pacific and Latin America. Towers Watson expects to deliver economies of scale, diversification of its current businesses, and increased growth and investment potential, as well as provide broader solutions and a deeper talent pool across a wider geographic footprint.
Towers Watson expects to have an annual EBITDA margin of 17%+ post-integration, and $80 million potential cost synergies on a year three run rate, with $80 million in expected one-time costs.
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