The acquisition of Willis Towers Watson by Aon has been making headlines for all the wrong reasons. The former is facing a minimum of three shareholder lawsuits accusing it of filing incomplete and misleading information with the Securities and Exchange Commission (SEC) with regard to the deal.
Willis Towers Watson has been question on whether the selling price is in the best interest of its shareholders.
In March, Willis had opted for a merger under which the shareholders were to receive 1.08 Class A ordinary shares of Aon for each share of Willis Towers stock they owned. On completion of the deal, the existing Aon shareholders, would own approx. 63 per cent while the existing WTW shareholders would own approx. 37 per cent of the combined company on a fully diluted basis. The implied combined equity value of the companies in the all-stock transaction was approx. $80 billion.
However, it is alleged that the proxy statement filed with the SEC goes against US securities law, as it offers incomplete and misleading information about the Company’s financial projections and analysis, just so that the shareholders felt the transaction was a fair one.
In May a class action case was filed alleging that proxy statement had many loopholes. It did not reveal how the calculations were done to adjust EBITDA, nor did it reveal the unlevered free cash flow, adjusted net income, levered free cash flow, and adjusted earnings per share, among other things.
Another law firm filed a class action in the federal district court in New York later seeking disclosure of the details that have been skipped in the proxy, and also sought unspecified damages and legal costs.
The allegation is primarily that shareholders have not been revealed important information required for them to appropriately evaluate how far the proposed deal was. This is against SEC regulations making the proxy statement inaccurate and misleading.
Last week, New York-based investor rights firm Halper Sadeh said it has also filed a class action alleging that Willis issued a materially misleading proxy statement.
Wolf Haldenstein Adler Freeman & Herz have also filed a suit on behalf of individual stockholder Shiva Stein, pointing out that the SEC filings had omitted significant financial projections required by stockholders to make an informed decision about supporting the transaction.
Those filing the lawsuits are surprised that the board of directors were party to the “unfair process” that is to lead to the completion of the acquisition process next year.
If the deal is successfully completed, the combined entity, called Aon, will have more than $20 billion in revenue. While Aon reported $11 billion in revenue with $2.2 billion net income last year, Willis Towers Watson reported a revenue of $9 billion and $1.4 billion net income.