(Reuters) - Willis Group Holdings (>> Willis Group Holdings PLC), the world's oldest insurance broker, will merge with human resources consultancy Towers Watson & Co (>> Towers Watson & Co) to form a company valued at about $18 billion (11.4 billion pounds).

The new company, Willis Towers Watson, will be domiciled in Ireland, where Willis is domiciled. The combined insurance, personnel and risk company is expected to benefit from Ireland's well-known low corporate tax rate.

Willis joins the list of insurance brokers looking to tap the lucrative benefits market through mergers with human resources consultancies.

The deal will give Towers Watson access to more than 80 countries, Chief Executive John Haley said on Tuesday.

Haley will head the combined company, which will have annual revenue of about $8.2 billion and 39,000 employees in 120 countries.

Towers Watson shareholders will receive 2.649 Willis shares and a cash dividend of $4.87 for each share held.

This values Towers Watson at $125 per share, below the stock's Monday close of $137.98.

Towers Watson shares were down 2 percent at $135.03 in morning trading. Willis shares were up 6 percent at $48.15.

The combined entity is expected to have an effective tax rate in the mid-20 percent range within two years, Willis Chief Executive Dominic Casserley said.

Towers Watson's current tax rate is about 34 percent, Chief Financial Officer Roger Millay said.

The companies also expect to save up to $125 million in costs within three years of the deal closing.

Willis shareholders will own 50.1 percent of the new company, which will have Casserley as its deputy CEO.

The deal allows Willis to better compete with Aon Plc (>> Aon PLC) and Marsh & McLennan Co (>> Marsh & McLennan Companies, Inc.). Aon bought HR consultancy Hewitt Associates Inc in 2010 to form Aon Hewitt and Marsh & McLennan owns New York-based Mercer.

Towers Watson, which was formed after Towers Perrin and Watson Wyatt merged in 2010 in a $3.5 billion deal, also provides risk and financial management services.

Willis has roots in London dating back to 1828. It brokered insurance for the ill-fated Titanic ship, the reconstruction of the World Trade Center after 9/11, and reinsurance for Hindenburg, the German airship that exploded in 1937.

ValueAct Capital Management, which owns 10.3 percent of Willis, has agreed to vote in favour of the deal.

Perella Weinberg Partners LP advised Willis, while BofA Merrill Lynch advised Towers Watson.

Weil, Gotshal & Manges LLP and Matheson were legal advisers for Willis and Gibson, Dunn & Crutcher advised Towers Watson.

(Editing by Rodney Joyce, Gopakumar Warrier and Kirti Pandey)

By Richa Naidu and Rama Venkat Raman