Aon PLC and Willis Towers Watson PLC abandoned a more than $30 billion tie-up to create the world’s largest insurance broker, unable to overcome the Department of Justice’s opposition to the merger.
The DOJ filed a lawsuit against the deal last month, the first big test of the Biden administration’s more muscular antitrust policy. The suit, filed in a Washington federal court, alleged that the proposed merger would lead to higher prices and reduced innovation for U.S. businesses, employers and unions that rely on their services.
The brokerages, which announced their deal in March 2020, help companies buy insurance and advise them on risk management. Both companies are also major consultants to businesses on health and other benefit packages for their employees.
The DOJ lawsuit followed an investigation of more than a year. Aon and Willis Towers had already sold off assets to smaller rivals to appease the anti-trust watchdog by creating new and larger competitors, but to no avail.
"We reached an impasse with the U.S. Department of Justice," Aon Chief Executive Greg Case said Monday.
A Justice Department representative couldn’t immediately be reached for comment.
The prospect of a lengthy court hearing was another reason for the merger’s demise. Aon and Willis Tower had requested a court hearing for Aug. 23, but a federal judge earlier this month ruled the trial wouldn’t start until Nov. 18.
"The inability to secure an expedited resolution of the litigation brought us to this point," Mr. Case said.
The companies’ decision to terminate the deal reinforces market expectations that Washington is poised to take an aggressive stance against mergers in industries that already have few competitors.
Aon and Willis Towers, which are both based in Ireland, are the No. 2 and No 3 biggest brokers measured by revenue behind industry leader New York-based Marsh & McLennan Cos. Together they would have total annual revenue of more $20 billion, leapfrogging Marsh’s $17.2 billion.
The Justice Department alleged that the scale of the combined entity would eliminate competition in several different U.S. product markets, including brokering services for property, casualty and liability insurance, as well as health benefits for large corporate customers.
The companies argued that the Justice Department’s opposition to the deal reflected a lack of understanding of their business, their clients and the marketplaces in which they operate.
Aon and Willis Tower had been betting on the merger to generate annual cost savings of $800 million and boost revenue through the sale of new products to help clients manage risks stemming from areas including climate change and intellectual property. The challenge for each company is reaching those goals without the benefits of the added heft.
Aon is also required to pay Willis Towers a $1 billion termination fee.
Both companies are listed in New York. Aon’s stock traded more than 6% higher, while Willis Tower’s stock fell.