By Liz Hoffman and Juliet Samuel 

When Willis Group Holdings PLC and Towers Watson & Co. announced plans to form an $18 billion global professional-services firm, they billed it as a merger of equals. But their investors don't see it that way.

In the all-stock deal, announced Tuesday, shareholders of Willis, a European insurance broker, will take 50.1% of the combined company, and owners of Towers Watson, of Arlington, Va., would get 49.9%. Together, they would form Willis Towers Watson, a global firm with offerings from insurance and reinsurance to retirement planning and health-care consulting.

Towers Watson shares dropped 8.8% Tuesday when investors realized what they were actually getting: a package of shares and a special cash dividend that amounted to $125.13 a share as of Monday's close, well below the $137.98 closing price of Towers Watson stock that day.

Shares of Willis, which is smaller than Towers Watson in terms of market capitalization, rose 3.3%. Barclays PLC analyst Jay Gelb said the company "appears to be extracting more value from the transaction than" Towers Watson.

Typically in mergers, the company giving up control is compensated by receiving more for their shares than they had been worth. That approach is sometimes true even in deals billed as mergers of equals; OfficeMax, for example, received a 3.8% premium in its 2013 merger with Office Depot. Rarely do premiums flow to the controller, as it will to Willis.

That could prove a stumbling block for the deal, Mr. Gelb wrote in a note to investors.

"Our sense is the deal could face challenges being approved by [Towers Watson] shareholders at the current discounted valuation," he wrote.

Towers Watson Chief Executive John Haley said the exchange ratio, which determines how many shares of Willis stock each Towers Watson investor would get, was set in May, using a 60-day moving stock-price average showing the two companies more equal in market capitalization than they were on the eve of the deal. "It wasn't done on a spot price at a single day," he said on a conference call Tuesday, where the first analyst question was about the discount. "We think that was an appropriate way to do it."

Towers Watson shareholders will receive 2.649 shares of Willis stock plus a one-time cash dividend of $4.87 a share.

Still, the tie-up in many ways appears to be one of relative peers. Mr. Haley of Towers Watson will run the combined company, while Willis Chairman James McCann will keep his title and Willis CEO Dominic Casserley will become deputy CEO. The board will be split evenly between legacy directors of both companies.

Towers Watson shareholders are getting something else that may explain the lack of a traditional M&A premium: tax savings. Willis, with headquarters in London and domiciled since 2010 in Ireland for tax purposes, has averaged a 23% tax rate over the past three years, versus 32% for Towers Watson, public filings show. The new company's blended rate is expected to be about 25%, generating savings that will be shared with all investors.

"There are several notable benefits secured by Towers that should force investors to look past the discount," research firm MKM Partners wrote in an investor note, citing "added capital flexibility and a much lower tax rate" as perks of the new company's Irish domicile. The corporate tax rate in Ireland is lower than in the U.S. and, unlike the U.S., the Irish government doesn't tax foreign profits.

Taxwise, the deal takes a page from a series of similar transactions struck in the past year, including Valeant Pharmaceuticals International Inc.'s purchase of Salix Pharmaceuticals Ltd. and Endo International PLC's acquisition of Par Pharmaceutical Holdings Inc. Foreign buyers, like Canada's Valeant or Ireland's Endo, can apply their more-favorable corporate tax regime to U.S. businesses, squeezing additional savings.

Executives of both Willis and Towers Watson on Tuesday were quick to play down the tax benefits, stressing the business rationale for joining Willis, a 187-year-old insurance brokerage, with Towers Watson, a big player in human resources and actuarial consulting.

Mr. Haley said in an interview that a lower tax rate was a benefit of the deal but said the "strategic nature of the deal was what drove the deal."

The combination would further diversify Willis beyond insurance and reinsurance broking and give Towers Watson access to a global distribution network. The combined company can cross-sell clients, including many Fortune 1000 companies, on a wider swath of services and products, from retirement consulting to risk management.

"We don't expect all these Towers Watson relationships to suddenly become interested" in using Willis as an insurance broker, "but we do think it can accelerate" Willis's market share in the U.S., Mr. Casserley said in an interview.

Executives of both companies touted the opportunity to expand Towers Watson's One Exchange Platform, which lets companies give their employees a regional choice of health plans. Towers Watson estimates the product can save companies an average of $1,400 an employee. Willis had already been buying the system to sell to its own customers, a relationship that eventually spawned merger talks, executives of the companies said.

The combination would create a professional-services giant with 39,000 employees spread across 120 countries, revenue of $8.2 billion and earnings before income, taxes, depreciation and amortization of $1.7 billion a year.

The deal is expected to cut between $100 million and $125 million in annual costs, excluding any tax benefits, the companies said. Analysts were unimpressed by estimates, which Mr. Haley said are "probably a little bit low," but he said he would rather exceed expectations than miss them.

Leslie Scism contributed to this article.

Write to Juliet Samuel at juliet.samuel@wsj.com

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