Opponents of the planned merger between Willis Group and Towers Watson have new fodder for criticism.
Before the $18 billion merger was announced in late June, Towers Watson Chief Executive John Haley sold nearly $10 million worth of company shares, the Wall Street Journal reported Thursday.
According to regulatory filings attained by the paper, Haley exercised 106,933 stock options and sold the underlying shares for a $9.7 million profit. The sale was Haley’s first in more than a year, and accounted for 55% of his stake in the professional services company.
The subsequent deal with Willis hit Towers Watson shareholders hard; criticism of the deal – which valued the company at about 9% less than the prior day’s closing price – led to a near 9% fall when the merger was announced on June 30. In fact, investors with Towers Watson swiftly filed a lawsuit against the company, alleging that company directors broke with their fiduciary duties in agreeing to the transaction.
Stockholders widely agreed that the person who stood the most to gain from the Willis-Towers Watson merger was Haley, who would be named CEO of the combined company despite a minority share of 49.9%.
“This deal destroys shareholder value,” Matthew Schoenfield, an assistant portfolio manager at Driehaus Capital Management told the WSJ.
Haley declined to comment on the development, though a personal familiar with the matter said the trades took place early in the company’s merger talks with Willis and were cleared by Towers Watson’s legal team.
Haley does not have a 10b5-1 plan, which allows executives to preschedule transactions for certain times or price triggers.
Kevin Murphy, an executive compensation expert and professor at USC Marshall School, told the newspaper that Haley’s decision to sell stocks is “unusual” and that “such moves tend to not go over well with investors.”
“Certainly, as a shareholder, you want to see a CEO that has skin in the game,” Murphy said. “You want to see them standing behind” major moves like mergers.
Murphy noted, however, that Haley has otherwise been “shareholder-friendly” given the absence of a “golden parachute” that would kick in when control of the company changes.
Haley has been CEO of Towers Watson since 1999, and has overseen a series of small acquisitions. In 2010, a merger with consulting firm Towers Perrin Forster & Crosby created what is today Towers Watson.
The newly combined company will be called Willis Towers Watson and is valued at $18 billion, expected to bring in revenues of $8.2 billion. Willis is also anticipating $100 million to $125 million in savings as a result of the deal, to be realized within three years of its closure.
The new firm will employ more than 39,000 workers in 120 countries – a key selling point for both companies looking to increase their global footprint.
Since the deal was announced, Towers Watson shares have traded about 13% lower, closing Wednesday at $120.16 – about 4% higher than the value of Willis’s merger offer.
