Ubben Criticizes “Bumpitrage” In ISS On Willis Merger

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Ubben Criticizes “Bumpitrage” In ISS On Willis Merger

Jeff Ubben claims that maneuvering over the proposed merger between Towers Watson & Co. and Willis Group Holdings Plc is legitimizing short-term shareholder activism.

Ubben, who runs activist fund ValueAct Capital Management, says that the Institutional Shareholder Services’ recommendation that Towers Watson & Co. investors reject the merger encourages “bumpitrage,” write Beth Jinks and Katherine Chiglinsky for Bloomberg.

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Ubben and ValueAct speak out against ISS report

Bumpitrage refers to a situation where shareholder activists buy stock in the target company in order to pressurize for a bump in the terms of the deal, according to a statement from ValueAct. Ubben’s fund is the second-largest shareholder in London-based insurance broker Willis Group.

“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,” ValueAct said in the statement. “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.”

In June Willis agreed to merge with Towers Watson in a move that would allow it to add consulting services, assisting its ongoing struggle with insurance rivals Aon Plc and Marsh & McLennan Cos. which are more diversified insurance companies. Proxy advisers ISS and Glass Lewis & Co. released a report last week in which they advised against the deal, citing an unfavorable valuation for the firm.

ValueAct pressing for deal to go through

Ubben became a member of the Willis board in July 2013, and has advocated for the deal since it was announced. In October he claimed that the deal would be completed by the end of the year and could see earnings double by 2018.

Activist fund ValueAct currently has over $19 billion in assets under management and is known for pushing for sales and other changes at companies it is invested in. The proposed deal would leave Willis investors with 50.1% of the combined company, which would be domiciled in Ireland and run by John Haley, Towers Watson CEO.

Towers Watson shareholders stand to receive 2.649 Willis shares and a one-time cash dividend of $4.87 for each share.

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. <i>To contact Brendan or give him an exclusive, please contact him at [email protected]</i>
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