Two firms with a Bermuda presence are to merge in an $8.7 billion deal.

Insurance and reinsurance broker Willis Group Holdings is to join forces in an all-stock transaction with professional services firm Towers Watson to add consulting operations and position itself to take on bigger US rivals.

The new company will be based in Ireland, Willis’ home base, lowering taxes for Towers Watson, which is headquartered in Arlington, Virginia.

Willis and Towers, who both have offices on Par-la-Ville Road in Hamilton, expect between $100 million and $125 million in cost savings within three years of closing the deal.

It is understood that a joint integration team, with members from both companies, is already working on an integration plan.

When the deal is finalised, Willis chairman James McCann will become chairman of the combined group and Towers Watson CEO John Haley will be CEO.

Mr Haley said: “This is a tremendous combination of two highly compatible companies with complementary strategic priorities, product and service offerings and geographies that we expect to deliver significant value for both sets of shareholders.

“We see numerous opportunities to enhance our growth profile by offering integrated solutions that leverage Willis’ global distribution network and superb risk advisory and reinsurance and insurance broking capabilities to deliver a more robust set of analytics and product solutions across a broader client base, including accelerated penetration of our exchange solutions platform into the fast growing middle market.”

Mr Haley added: “We also expect to realise substantial efficiencies by bringing our two organisations together and have a well-defined integration road map to capitalise on identified savings, ensure the strongest combination of talents and practices and realise the full benefits of the merger for all of our stakeholders.”

And he said: “As we bring these two companies together, we are confident associates across both organisations will enjoy increased development opportunities as part of a stronger and more global growth company.”

Willis chief executive Dominic Casserley will be deputy CEO.

He said: “The rationale for the merger is powerful — at one stroke the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients.”

Mr Casserley added: “The opportunity to deliver significant savings to our growing middle-market client base with Towers Watson’s market-leading private exchange platform is particularly attractive.”

The combined firms, to be named Willis Towers Watson, will be advisers to more than 80 per cent of the world’s top 1000 companies, as well as a “significant” presence with mid-market and smaller employers worldwide.

The deal values Towers Watson at about $125 a share and the combined company will have a market value of around $18 billion.

Towers Watson shares closed yesterday at $126.21 — down 11.77 points (8.53 per cent) on the previous day.

Willis Group Holdings ended the day at $46.84, a rise of 1.44 points (3.17 per cent) compared to Tuesday.

The new company will have around 39,000 employees in more than 120 countries.

The deal — which is expected to be finalised by the end of the year — will leave Willis shareholders with about 50.1 per cent of the new company with Towers Watson shareholders holding around 49.9 per cent.