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Aon / WTW: Reports say EC remedy package in development, progressing

29th March 2021 - Author: Steve Evans

Aon and Willis Towers Watson (WTW) are making progress in developing a remedy proposal for European Commission regulators, as the pair look to be proactive in making concessions to get the merger completed, according to reports.

aon-willis-towers-watson-merger-antitrustAs we’ve previously written, competition related concerns are said to be rising, with the European Commission reported ready to raise antitrust concerns and in the process of preparing a statement of objections, a charge sheet explaining potential competitive harm as a result of the mega-merger.

Sources continue to believe that this statement of objections is likely to be delivered soon, as the EC competition team are expected to be close to finalising it.

But it seems Aon and Willis Towers Watson (WLTW) may proactively be preparing a package of remedies that could be used to stave off the need for the statement to be published.

Sources tell us that a statement of objection, in relation to antitrust issues in mergers, would likely be particularly detailed and involve disclosure of a lot of information that parties in the merger may not really want to see publicised.

As a result, it can be preferable to get ahead of the regulators and offer a remedy package in advance, we understand.

The Aon and Willis Towers Watson merger has been attracting increasing amounts of attention, in particular from investors in the merger arbitrage and event driven hedge fund space.

As we explained recently, sources are saying that a sale of reinsurance arm Willis Re remains a possibility, while divestments are expected to need to be relatively significant in size, perhaps nearing the cap on divestitures, of $1.8 billion of revenue, set in the merger agreement itself.

Last week it was also reported that the French broking market is discussing the possibility that Willis Towers Watson (WTW) may be considering a sale of its Gras Savoye unit ahead of the planned merger with Aon, perhaps a proactive move designed to assuage some of the EU regulators concerns.

Other rumours circulating include the potential for Willis Re to be broken up in some way, with certain pieces sold off, alongside some regional corporate broking unit divestments, all in an effort to gain regulatory approval to move forwards and close the merger sooner rather than later.

As we also documented, specialist antitrust publications have suggested that concerns from the US government may have a reinsurance focus, as well as in other areas like benefits and large corporate clients.

Now, specialist antitrust and M&A publisher CTFN and another specialist in this field DealReporter are both reporting that a remedy package is being drawn up by the parties, in an attempt to get ahead of a statement of objections from the EC.

Both publishers say that their sources explain that the construction of a package of remedies is progressing well, perhaps near ready for communication to regulators.

However, entering into negotiations with regulators on a prepared package of remedies may not be sufficient to ward off a statement of objections, the publishers explain and in the past the EC has still delivered its statement even after having been in discussions with parties on potential remedies and divestments.

Of course, it seems natural for Aon and WTW to have already considered what kind of remedies, divestitures, might be palatable to them, while assuaging the concerns of the European Commission.

We’d imagine the parties have a range of options that they might present, but that perhaps the challenge is in finding a remedy proposal that could ward off the need for the statement of objections to be published at all.

In a merger deal of this size and complexity, covering a number of industry sectors such as insurance, reinsurance, benefits and investments and is global in nature, there are so many potential ways you could slice segments off the merger parties and potentially assuage the concerns of regulators, that designing the perfect package of remedies to offer will not be a simple process.

The fact the parties may be going through this process though, is no real surprise.

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