Consultancy firms Towers, Perrin, Forster & Crosby and Watson Wyatt will merge, the two firms announced yesterday.
The US$3.5bn all stock deal will create a new publicly listed company called Towers Watson & Co.
Watson Wyatt chief executive John Haley will serve as chief executive of the combined firm, while Towers Perrin chief executive Mark Mactas will serve as president.
The companies expect Towers Watson to have combined revenues in excess of $3bn.
The firms said they expected the merger to lead to cost savings of around $80m a year - but noted full realisation of any savings would take three years and cost around $80m.
Haley said: "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."
Under the terms of the agreement, Watson Wyatt shareholders will be entitled to receive 50% of the combined company's shares on a fully diluted basis. Towers Watson shares issued to Watson Wyatt shareholders in the merger will be freely tradable.
Towers Perrin shareholders - who are all active employees of Towers Perrin - plus a group of Towers Perrin employees to be designated to receive certain equity incentive awards, will be entitled to receive 50% of the combined company's shares on a fully diluted basis.
Towers Watson shares issued to Towers Perrin shareholders will be restricted shares that become freely tradable over a period of one to four years.
The transaction is subject to approval by each company's shareholders and regulatory approvals.
Subject to satisfaction of these conditions, the companies anticipate a shareholder vote in the fourth quarter of 2009 and a closing date as soon as possible thereafter.
The deal is the second large-scale consulting merger announced this year. In February, Mercer and Callan Associates, also US-based firms, announced a merger that would create one of the world's largest consulting firms.
However, the consultants pulled out of the deal the following month without explanation (Global Pensions; March 30, 2009).
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