ValueAct Capital Management called opposition to Towers Watson & Co.'s proposed merger with Willis Group Holdings “bumpitrage,” said a news release from the activist hedge fund manager.
ValueAct singled out Institutional Shareholders Services for recommending shareholders vote against the proposed transaction, accusing it of “legitimizing … bumpitrage.”
In such situations, “stockholder activists purchase the target company stock exclusively to lobby for the proverbial bump,” the news release said. “ISS encouraging stockholders to walk away from a highly accretive deal if they do not receive a renegotiation of the deal economics incentivizes the very shortest-term profiteering. It gives an opening for short-term investors to run into every deal and attempt to collect a tax. When this goes badly, longer-term stockholders suffer the opportunity costs of missed value creation.”
ValueAct owns 475,000 Towers Watson shares and 18.4 million, or 10.2%, of Willis' outstanding shares. ValueAct entered into a voting agreement with Towers Watson to vote in favor of the merger, while it also intends to vote its Willis shares in support of the transaction, the release said. Towers Watson has 69.2 million shares outstanding.
The proposed deal “should be highly accretive to both sets of stockholders over a multiyear time horizon,” the ValueAct release said.
“It is indisputable to say that the deal would be better for Towers Watsons stockholders if they got better economics. Likewise, the deal would clearly be better for Willis stockholders if they received a premium in line with other transactions involving Irish-domiciled companies merging with U.S. (companies),” the ValueAct release said. “But, at the end of the day, this is a fair deal negotiated in good faith by two management teams and boards of directors”
A call to ValueAct was referred to Allison A. Bennington, ValueAct general counsel and partner, who couldn't be reached for comment.
Subodh Mishra, ISS executive director, communications, declined to comment.
The special meetings of Towers Watson and Willis are Nov. 18.
