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Starboard discloses stake in Willis, deems it a ‘value creation opportunity’

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Activist investor Starboard Value has disclosed a new position in Willis Towers Watson following the collapse of the $30bn mega-merger deal with Aon.

During the Capitalize for Kids Investors Conference held this week, Starboard CEO Jeff Smith said the giant broker is undervalued and has underperformed compared to its peers since the 2016 merger between Willis and Towers Watson, but that it could double its share price in the next three years.

In a presentation published on the investor’s website, Starboard attributed the poor performance to “a series of operating misses [that] contributed to a widening valuation discount to peers”.

The activist investor believes that there is room for margin improvement across the company, particularly in the commercial risk and broking segment, Willis’s retail division.

Starboard sees no evidence that Willis has a structural disadvantage compared with its peers and mentioned in the presentation that Aon provides a template for improving Willis’s margins.

“We believe there is a significant value creation opportunity at Willis Towers Watson,” Smith said at the conference in Toronto, according to a report by Bloomberg.

Starboard is not the only investor with new positions in Willis. Last month, the Wall Street Journal reported that Elliott Management had also taken a stake in the broker.

In early September, this publication reported that Willis could face activist pressure as the Children's Investment Fund (TCI) had been building a stake in the company.

TCI started to engage with Willis management to express views on the path forward for the broking and professional services business.

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