NEW YORK (Reuters) –
Consulting firms Towers Perrin Forster & Crosby and Watson Wyatt Worldwide (WW.N) said on Sunday they plan to merge in an all-stock deal valued at about $3.5 billion, as they hope to cut costs amid an economic slump that has caused clients to curb discretionary spending.
Under terms of the deal, Watson Wyatt shareholders will receive 50 percent of the shares in the combined company, which will be named Towers Watson & Co.
Towers Perrin shareholders and some designated employees will be entitled to the other 50 percent of the shares, though on a restricted basis.
It was unclear which company would own the other.
Watson Wyatt Chief Executive John Haley will be chairman and CEO of the combined company. Watson's Chief Financial Officer Roger Millay will hold the same title at the new company.
Towers Perrin's Chief Executive Mark Mactas will serve as president and chief operating officer of the new company.
It will take three years to achieve savings of $80 million through job cuts and the streamlining of overlapping operations, and the companies expect one-time costs of $80 million from the merger and "significant noncash expenses" for the first two years.
In an interview with Reuters, Watson's Haley and Towers' Mactas declined to provide much detail on the deal, including the earnings multiples on the transaction or where the new headquarters would be.
Haley said the combined companies' headquarters would not be located at either of the current locations, but it will be in the U.S. Northeast.
Watson Wyatt's headquarters are in Arlington, Virginia while Towers Perrin makes its headquarters in Stamford, Connecticut.
Both chief executives told Reuters that a large chunk of the synergies would come from North America, which accounts for 65 percent of the revenue at Towers Perrin and 45 percent at Watson Wyatt.
"We expect that to come from combining management teams and general administrative expenses," Haley said. He added there would be job cuts, but said he had no further details.
Mactas said savings would also be realized as the companies combined finance, accounting and sales platforms. "We also have a lot of real estate that we lease around the world, and over time we'll co-locate, we'll do that in an efficient manner."
The deal could cause a potential conflict of interest if the new company provides executive compensation consultancy to the same clients that provide the company millions of dollars in revenue for employer benefits consultancy services.
The subject of executive compensation has become more controversial in the past few months, coming under intense scrutiny by the U.S. government in light of recent federal bailouts.
The deal, which will create a combined company with annual revenue of more than $3 billion and a possible workforce of more than 14,000 employees, could put pressure on rivals such as Hewitt Associates (HEW.N) and Mercer, which is a subsidiary of Marsh & McLennan Companies (MMC.N).
The deal comes after Watson Wyatt last month lowered its profit and revenue outlook for the full year, saying projects directly tied to helping clients manage costs, mitigate risks or meet regulatory requirements were doing well but divisions which rely on shorter-term, more discretionary contracts, were hurt by the slowdown in the economy.
At the time, CFO Millay said the company expected demand for services in its human capital group -- which covers executive pay and talent management -- to continue to decline. Revenue from that group fell 25 percent in the third quarter.
Watson shares have fallen more than 20 percent since May. They closed at $41.18 in Friday trade on the New York Stock Exchange.
Watson Wyatt will designate four of its six current independent board members to the new company's board, and add another internal company executive, Haley said, who will also be on the new company's board.
Towers Perrin will also name four of its independent directors to the new board, which will also have Towers' Chief Executive Mark Mactas and one internal nominee.
(Editing by Maureen Bavdek, Gary Crosse and Phil Berlowitz)
LONDON (Reuters) –
The dollar recovered a little ground on Monday after falling late last week on a renewed call by China for a super-sovereign reserve currency, and stocks traded just below the top of recent ranges.
China, which holds nearly $2 trillion of reserves believed to be concentrated in dollars, repeated its calls for an end to the dominance of a single currency in global finance.
World stocks have shuffled sideways in the past few weeks as investors have questioned how quickly the global economy will return to growth, giving a boost to battered government bonds and pushing yields lower.
"It's quite clear that we have lost momentum over the last week or so. The strong rally that we saw in cyclicals through the early part of the second quarter has started to fade," said Darren Winder, head of macro and strategy research at Cazenove.
Many investors are also sticking to the sidelines as the second quarter winds down and ahead of U.S. and European summer holidays.
The MSCI world equity index (.MIWD00000PUS) dipped 0.18 percent, pulling away from 12-day highs hit on Friday. The index is down over 4 percent from the year's highs set earlier this month.
The FTSEurofirst 300 index (.FTEU3) edged up 0.1 percent, with firmer pharmaceutical and mining stocks outpacing weaker financial shares.
However, the Shanghai Composite Index (.SSEC) climbed 1.2 percent to a one-year peak, getting a lift from hopes that robust bank lending will keep powering the Chinese economy through the export downturn.
The dollar index, a gauge of its performance against six major currencies, rose 0.22 percent to 80.049 (.DXY), off a two-week low struck on Friday.
The euro retreated 0.17 percent to $1.4024, while the dollar was up 0.26 percent at 95.42 yen.
China and Brazil said on the sidelines of a weekend meeting of central bankers in Basel they were discussing a currency arrangement to allow exports and importers to settle deals in local currencies, thereby avoiding the dollar.
Pressure from emerging market countries to seek an alternative to the dollar as reserve currency has contributed to weakness in the U.S. currency in recent weeks.
"Even if a new supra-national currency were created, it would not be in China's or Russia's interest to reapportion their reserves in a new direction quickly," said analysts at Calyon in a client note.
"For an FX market spoiled by the excitement of big moves, the increasing drift toward range trading must risk dragging in the summer doldrums prematurely."
Crude oil steadied at $69.15 a barrel as investors looked to tensions in major exporter Nigeria.
Oil weakened earlier as the supply threat appeared to ease after four Nigeria militant factions accepted in principle an amnesty offer from the country's president.
However, Nigerian militants said on Monday they attacked a Shell (RDSa.L) platform in the Niger delta, despite the amnesty offer.
Euro zone government bonds were flat. The September Bund future was unchanged from Friday at 120.96.
(Additional reporting by Atul Prakash, editing by Mike Peacock)
SHANGHAI (AFP) –
Beijing has suspended buying non-ferrous metals for state reserves after government stockpiling led to a surge in prices, Chinese media has reported.
China has been building its inventories of metals, including 235,000 tonnes of copper, over recent months, Caijing magazine reported on its website over the weekend, citing Yu Dongming, an official with the state economic planner.
China also bought 590,000 tonnes of aluminium, 159,000 tonnes of zinc, 30 tonnes of indium and 5,000 tonnes of titanium, said Yu, who works in the National Development and Reform Commission's industry department.
"In the current market situation, aluminium firms have already started to make profits and non-ferrous metals prices have rebounded," he was quoted as saying.
"It's had the expected effect and, given these circumstances, we don't expect the state will continue to build its reserves."
Yu added that middlemen, rather than domestic companies that the government intended to support, had unexpectedly become "the biggest beneficiary" of Beijing's buying spree.
China has been buying up crude oil, copper, coal and a host of other key raw materials despite the financial slump having slashed demand for the exports responsible for the Asian giant's once ravenous appetite.
The State Reserve Bureau has been stockpiling, but so too have producers, distributors and other speculators hoping to profit from an expected rise in prices once the world economy starts to recover, analysts say.