Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Categorized | Insurance

Some mergers are more equal than others


Posted on June 30, 2015

epa02438754 People walk past Willis Tower, formerly the Sears Tower, and the tallest building in North America, as it stands as one of the most recognizable features of the skyline in Chicago, Illinois, USA, on 09 November 2010. A picture of the famous building has recently shown up on an al-Qaeda online magazine. Law enforcement officials in the Chicago area are looking for any homegrown link to the terrorist organization after mail bombs were addressed to two Chicago locations. EPA/TANNEN MAURY©EPA

Joe Plumeri might be spinning in his grave . . . if he weren’t alive and well and writing self-help books. Observers doubt that benefits consultant Towers Watson could have executed what looks like a reverse takeover of Willis had the New Jersey-born financier still been running the insurance broker. Insurance salesmen are a hard-boiled lot: clients include mid-cap company owners as keen to pay premiums as they are to contract verrucae. Benefits consultants are, in contrast, at the spoddy end of financial services, particularly where their activities shade into investment advice and actuarial work.

What evidence is there that the $18bn merger is a revenge of the nerds? The positioning of Towers boss John Haley as chief executive of the combo is Exhibit A. Willis boss Dominic Casserley would be his deputy. That means if push comes to shove, Casserley would be cassoulet, or at least toast.

    Exhibit B is the fact that Willis shareholders will get just over half the shares in the combo. Willis’s equity was valued at $8.1bn before markets opened in the US, where both are listed, while Towers’ stock was worth $9.6bn. You could label half the difference as a takeover premium if you’re one of those miserabilists who refuses to believe in mergers of equals or fairies.

    Cost synergies of $100m are forecast. That should spook administrators, but not profit-getters. Both companies have big offices in London, where Willis’s unofficial headquarters are next door to Lloyd’s. But there is little operational overlap. Savings would include a lower tax bill once Towers reversed its US tax registration into Willis’s Irish domicile.

    The growth story includes Willis folk cross-selling Towers’ US-inspired healthcare exchange, assuming the rest of the world opts for a healthcare system as dysfunctional as that of the US. The defensive context is that Wowsers — or, as we should properly call it, Willis Towers Watson — should be better placed to compete with Marsh and Aon, brokers that already have employee benefits arms.

    Fund managers resent being hired and fired at the behest of Towers’ powerful investment advisers. But modest scope for restructuring means these arbiters should sail on unperturbed. Stock pickers are thus exposed to a traumatic denial of Schadenfreude, or Schadenfreudeabwesenheit, as a Viennese psychoanalyst would call it.

    jonathan.guthrie@ft.com