WSH

Towers Watson & Co. and Willis Group Holdings PLC recut the terms of their $18 billion merger after failing to get enough support for the deal from Towers Watson shareholders.

Towers Watson ​said it would increase a special cash dividend payable to its shareholders to $10 a share from $4.87, a move that equals a roughly 4% price bump. The companies hope the increase will sway enough Towers Watson shareholders, who rejected the original deal on Wednesday.

The last-minute sweetener, which amounts to about $350 million, comes after Towers Watson investors had criticized the deal's price as too low. Towers Watson and Willis, whose investors must also approve the transaction, said they would hold new votes by Dec. 16.

Under the new terms, Towers Watson would owe Willis $60 million if either set of shareholders votes down the transaction.

Towers Watson's merger with Willis, an insurance broker, drew criticism shortly after it was announced in June. Towers Watson investors said the deal undervalued the company, which offers a range of professional services related to employee benefits, talent management and risk management, among other things. The price represented a 9% discount to where Towers Watson shares had traded the day before the merger was announced.

Hedge fund Driehaus Capital Management LLC bought 1.6% of Towers Watson after the deal was announced and wrote public letters urging investors to vote against it unless the terms were renegotiated. Proxy advisory firm Institutional Shareholder Services Inc. also recommended a "no" vote, saying that the transaction undervalued Towers Watson's faster-growing businesses.

The companies have said the deal would generate long-term growth, in large part from cross-selling Towers Watson's consulting, actuarial and other business offerings to Willis's insurance clients, and vice versa.

They also pointed to tax savings available through Willis's Irish domicile, which would lower the combined company's rate.

Hedge fund ValueAct Capital Management LP, which owns 10% of Willis and whose chief executive, Jeffrey Ubben, sits on its board, supports the renegotiated terms, Willis said. Mr. Ubben had criticized investors seeking a price increase, saying they were being short sighted.

Write to Liz Hoffman at liz.hoffman@wsj.com

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(END) Dow Jones Newswires

November 19, 2015 16:35 ET (21:35 GMT)