Towers Perrin, Watson Wyatt to merge in $3.5 billion deal

By Jui Chakravorty Das and Aarthi Sivaraman

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.