Willis Group (WSH) Stock Soaring Following Towers Watson Merger

NEW YORK (TheStreet) -- Shares of Willis Group Holdings  (WSH) were soaring, sharply higher by 5.59% to $47.94 on heavy volume in late morning trading Tuesday, after the company announced its $18 billion all stock merger deal with Towers Watson & Co  (TW) this morning.

Under the terms of the deal, Willis shareholders will own a majority of shares with 50.1%, while Towers Watson shareholders will hold the rest with 49.9%.

The combined company will be named Willis Towers Watson and is expected to rake in $8.9 billion in annual revenue, according to the AP.

The two companies estimate that the merger will save between $100 million to $125 million within three years after the closing of the deal.

Shares of Towers Watson were lower by 2.3% to $134.80 today.

London-based Willis Group provides insurance brokerage, reinsurance and risk management consulting services.

Separately, TheStreet Ratings team rates WILLIS GROUP HOLDINGS PLC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate WILLIS GROUP HOLDINGS PLC (WSH) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.5%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • WILLIS GROUP HOLDINGS PLC's earnings per share declined by 14.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WILLIS GROUP HOLDINGS PLC reported lower earnings of $1.99 versus $2.05 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus $1.99).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The gross profit margin for WILLIS GROUP HOLDINGS PLC is currently lower than what is desirable, coming in at 33.12%. Regardless of WSH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WSH's net profit margin of 19.31% compares favorably to the industry average.
  • The debt-to-equity ratio of 1.00 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, WSH's quick ratio is somewhat strong at 1.06, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: WSH Ratings Report

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