Two large, multinational consulting firms with major benefits operations have announced a $3.5 billion merger.

The boards of Towers, Perrin, Forster & Crosby Inc., Stamford, Conn., and Watson Wyatt Worldwide, Inc, Arlington, Va. unanimously approved a merger agreement Sunday.

The companies are describing the deal as a merger of equals.

The combined company would be named Towers Watson & Company and would be publicly listed.

Watson Wyatt Chief Executive Officer John Haley would be CEO of Towers Watson, and Towers Perrin CEO Mark Mactas would be president of Towers Watson.

The Towers Watson board would have seats for 12 directors, with half of the directors coming from Watson Wyatt and half from Towers Perrin.

Watson Wyatt shareholders would receive 50% of the Towers Watson shares on a fully diluted basis, and the shares would be freely tradable.

Tower Perrin shareholders, and a group of Towers Perrin employees eligible to receive equity incentive awards, would receive the other 50% of the Towers Watson shares. Those shares would be restricted. The shares would become freely tradable over a period of 1 to 4 years.

The companies expect there to be 81 million shares outstanding after the proposed merger is consummated.

After consummation, Towers Watson could emerge with 14,000 employees in more than 25 countries and $3 billion in annual revenue.

About 56% of the annual revenue would come from North American operations, Watson Wyatt and Towers Perrin estimate.

The companies expect to spend $80 million on one-time, merger-related costs and to save about $80 million per year on operating costs starting around 3 years after consummation.

The transaction is subject to approval from the shareholders of both companies and competition reviews in the United States and other countries.

The companies say a shareholder vote should take place in the fourth quarter of 2009 with a closing date coming soon after the vote.

If either company walks away from the deal, that company could end up paying the other company anywhere from $10 million to $65 million in fees, depending on the circumstances surrounding the breakup, according to a document filed with the U.S. Securities and Exchange Commission.

A unit of Goldman Sachs Group Inc., New York, will serve as financial advisor to Towers Perrin, with Milbank, Tweed, Hadley, & McCloy L.L.P., New York, acting as legal advisor.

Banc of America Merrill Lynch Securities, a unit of Bank of America Corp., Charlotte, N.C., is acting as financial advisor to Watson Wyatt, with Gibson, Dunn & Crutcher L.L.P., Los Angeles, acting as legal advisor.