Trial Likely 'Unavoidable' and Could Take Over Nine Months Before the Judge Rules, Says Analyst After DoJ Sued to Block AON (AON)-Willis (WLTW) Merger

June 23, 2021 9:54 AM EDT
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Cowen Washington Research Group's Jaret Seiberg has weighed in after the Department of Justice (DoJ) filed an antitrust suit to block the merger of two insurance companies AON (NYSE: AON) and Willis Towers Watson (NASDAQ: WLTW).

“We believe the Justice Department wants AON to divest complete business units to address competitive concerns with the Willis acquisition. If AON does not relent, then it is likely that this case goes to trial as we have trouble seeing a middle ground for a settlement. Government often has the edge in litigation though it is too early to assess how the judge views this case,” the analyst wrote in a memo.

The Justice Department announced earlier it filed the suit in federal court, stating the deal could eliminate competition, result in higher prices and halt innovation for U.S. companies, employers, and unions that use their insurance services.

The deal, which includes AON’s $30 billion acquisition of Willis Towers Watson, would merge two of the “Big Three” global insurance brokers and wipe out competition in five markets including property, casualty and financial risk, health benefits, actuarial services for pension plans, reinsurance and retiree insurance exchanges, said the DoJ in the lawsuit.

In response, the insurance giants said the DoJ’s move “reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate." The merger would “accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace,” the companies said in a joint statement.

In a bid to obtain approval for the merger from the European Union, AON and Willis Towers Watson agreed to divest certain assets. However, the DoJ representatives stated on Wednesday those divestments would not be enough to protect U.S. consumers.

Seiberg adds that Aon should argue that the DoJ was “wrong when it identified only three competitors in the market.”

“That means litigating this case to a decision before a federal judge. In general, we always give the government the edge in litigation. That said, there are examples of judges siding with companies on the market definition. It is why we may not get a strong sense of how the cases will be decided until the trial is underway. Regardless, this suggests to us that a quick resolution that would be favorable to AON completing the acquisition of Willis is unlikely. Instead, this process could take nine months or longer before the judge rules,” Seiberg concludes.



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