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U.S. Sues to Block Aon’s $30 Billion Willis Towers Deal (2)

June 16, 2021, 10:03 PM

The U.S. Justice Department sued to block Aon Plc’s proposed $30 billion acquisition of Willis Towers Watson Plc, saying the deal to create the world’s largest insurance brokerage is anticompetitive.

The department’s antitrust division filed a lawsuit in federal court in Washington Wednesday asking a judge to stop the deal, arguing that it would create too much concentration in the market and hurt businesses, their employees and retirees.

“Today’s action demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country,” Attorney General Merrick Garland said in a statement.

Shares of both companies tumbled on the news. Aon shares closed down 3.1%, the most since January. Willis shares fell more than 7% to the lowest point since late April.

The proposed deal, the largest for the industry, would combine the second- and third-largest brokers and would allow the new firm to overtake market leader Marsh & McLennan Co.

Brokerages, which help connect businesses looking for coverage with insurers, have been aggressively merging to diversify, boost commissions and serve customers who increasingly want to deal with fewer intermediaries.

The case marks the first lawsuit by the Justice Department to stop a merger under the Biden administration, which has yet to nominate someone to take over the department’s antitrust division. On Tuesday, he named Lina Khan, a Columbia Law School professor, as the chairwoman of the Federal Trade Commission, which shares antitrust enforcement duties.

Aon and Willis Towers said in a statement they remain committed to the merger and are making “material progress” with other regulators reviewing the deal

“We disagree with the U.S. Department of Justice’s action, which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate,” they said.

Earlier: Aon Sees $30 Billion Takeover as Answer to Age of Volatility

In 2019, Aon explored a tie-up with Willis Towers Watson, but ended up abandoning the deal after reports about the talks. Analysts at the time had warned that regulatory issues could prove to be a hurdle for any transaction. A year later, Aon and Willis Towers Watson were back at the deal table, agreeing to an almost $30 billion transaction that would combine two industry heavyweights.

The Justice Department said the deal would turn the “Big Three” insurance brokers into the “Big Two,” giving the company pricing power over companies.

“Aon likely would use that leverage against American businesses,” the complaint said. “Businesses likely would pay the price in the form of higher fees for lower-quality services for the management of their most complex and expensive commercial risks through insurance and reinsurance.”

Aon and Willis have agreed to sell a portfolio of assets to resolve antitrust concerns in the European Union, which is reviewing the deal. Earlier this month, Aon agreed to sell two retirement-related businesses to address questions raised by the Justice Department related to the transaction. The Justice Department said the divestitures agreed to by the two firms didn’t go far enough to protect American consumers.

(Updates with DOJ comment in third paragraph)

--With assistance from Katherine Chiglinsky.

To contact the reporters on this story:
David McLaughlin in Washington at dmclaughlin9@bloomberg.net;
Max Reyes in New York at mreyes125@bloomberg.net

To contact the editor responsible for this story:
Sara Forden at sforden@bloomberg.net

© 2021 Bloomberg L.P. All rights reserved. Used with permission.

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