British insurance broker Willis Group and US professional services firm Towers Watson announced plans to combine Tuesday, creating a company worth about $18 billion.

The companies said that the stock-swap merger would result in $120-$125 million in cost savings and boost both companies' client lists.

The combined company will be called Willis Towers Watson and will be domiciled for tax purposes in Ireland, resulting in lower taxes for Towers Watson.

Towers Watson shareholders will receive 2.6490 Willis shares for each Towers share, plus a one-time cash dividend of $4.87 per Towers share.

After the deal closes, Willis shareholders will own about 50.1 percent of the company, with Towers Watson owning the rest. Each company will nominate six members of the board of directors.

"At one stroke, the combination fast-tracks each company's growth strategy and offers a truly compelling value proposition to our clients," said Willis chief executive Domic Casserley.

"We will advise over 80 percent of the world's top-1000 companies, as well as having a significant presence with mid-market and smaller employers around the world."

Willis dates to 1828 and offers brokerage, reinsurance and risk management consultancy services, including specialized risk management services to the aerospace, energy and construction industries. It had revenues of $3.8 billion in 2014.

Towers Watson provides consultancy services to companies on employee benefits,  talent management and  risk and financial management. It reported $3.5 billion in revenues for last year.

In mid-morning trade, shares in Towers Watson dropped 2.3 percent to $134.82, while Willis rose 4.9 percent to $47.60.