The U.S. Department of Justice wants to stop the proposed merger of two of the world’s largest insurance companies, Aon and Willis Towers Watson.
On Jun.16, the DOJ filed an antitrust lawsuit against the proposed $35 billion merger of two major insurance brokers. The lawsuit alleges that the union of Aon and Willis Towers Watson threatens to eliminate competition, raise prices, and reduce innovation for American businesses, employers, and unions that rely on these important services.
The companies, which are both incorporated in Ireland, are two of the “Big Three” global insurance brokers. New York-based Marsh McLennan is also part of the “Big Three.”
“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,” said Attorney General Merrick B. Garland in a statement. “American companies and consumers rely on competition between Aon and Willis Towers Watson to lower prices for crucial services, such as health and retirement benefits consulting. Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave American customers with fewer choices, higher prices, and lower quality services.”
Aon and Wills Towers Watson operate “in an oligopoly” that will have even more leverage when the merger deal is closed, the DOJ complaint alleges.
Aon and Willis Towers Watson investor relations respond to the lawsuit
Officials with Aon and Willis Towers Watson didn’t take the news sitting down. The companies released a joint statement to investors saying they disagree with the DOJ’s action, which “reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”
The companies claim the merger will give clients more choices. “Aon and Willis Towers Watson operate across broad, competitive areas of the economy, and our proposed combination will accelerate innovation on behalf of clients, creating more choice in an already dynamic and competitive marketplace,” the companies said in a joint statement.
The proposed merger of the two companies was first announced in May 2020. The transaction is expected to generate more than $10 billion in shareholder value and give the combined company a value of about $80 billion.
How will the merger affect Aon and Willis Towers Watson stock?
Under the deal, the combined company would stay under the Aon name and be headquartered in London. Aon shareholders would own about 63 percent of the combined company, while Willis Towers Watson shareholders would own about 37 percent. Willis Towers Watson shareholders would get 1.08 shares of Aon for every share they own.
Stock prices for both Aon and Willis Towers Watson dropped after news of the DOJ lawsuit.
DOJ calls divestiture move inadequate
Last month, Aon and Willis Towers Watson announced that they would sell off $3.57 billion in assets to Arthur J. Gallagher & Co. so their merger plans would be more palatable to regulators in the U.S. and the European Union. However, the move was “inadequate to protect consumers,” the DOJ said. The European Commission is expected to review the merger by Jul. 27.