Aon’s proposed $30 billion acquisition of Willis Towers Watson has hit a major roadblock, with the U.S. Department of Justice suing to block the deal.
The DOJ’s civil antitrust lawsuit argues that the merger, which would bring together two of the “Big Three” global insurance brokers, could harm competition and raise prices. What’s more, the deal could also harm innovation for American businesses, employers and unions that rely on both companies’ services, the suit alleges.
“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,” U.S. Attorney General Merrick Garland said in prepared remarks. “Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave Americans with fewer choices, higher prices and lower quality services.”
The DOJ complaint alleges the merger would “substantially” harm competition in five market segments: property, casualty and financial risk broking for larger customers, health benefits broking for large customers, actuarial services for large single employer defined benefit pension plans, the operation of private multicarrier retiree exchanges, and reinsurance broking.
Aon responded to the DOJ lawsuit with a statement that was highly critical of the U.S. government action, accusing the lawsuit of “reflecting a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”
Aont insisted that both companies “operate across broad, competitive areas of the economy” and that the proposed combination would accelerate innovation in multiple areas. The company added that it and Willis Towers Watson “continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination.”
The mega-merger deal, first announced in March 2020, already has shareholder approval from both companies, who had hoped to complete the transaction by the first half of 2021.
Since then, Aon and Willis Towers Watson had been working to gain regulatory approval around the world. In May, both companies agreed to sell off some assets to Arthur J. Gallagher & Co. for nearly $3.6 billion, in order to settle antitrust questions raised by European regulators.
Plans are for the combined firm to be led by Aon CEO Greg Case and Aon Chief Financial Officer Christa Davies. The board of directors would comprise proportional members from Aon and Willis Towers Watson’s current directors. Willis Towers Watson CEO John Haley would take on the role of executive chairman.
At the time of the announcement, Case said that the merger would “accelerate innovation” and help the combined entity provide better products for clients.
But the U.S Department of Justice under Garland’s leadership strongly disagrees.
“American companies depend on [Aon and Willis Towers Watson] to craft and administer health and retirement benefits, and to keep their costs down by managing complex and evolving risks. They compete head-to-head to provide these services, which helps ensure businesses obtain innovative, high-quality broking services to manage their risks and provide critical health and retirement benefits to their employees at a reasonable cost,” the DOJ announcement said.
The complaint alleges Aon and Willis Towers Watson operate in an “oligopoly” and would have even more leverage if the merger is allowed to close.
Source: U.S. Department of Justice