2015 is the biggest year ever for mergers and acquisitions. Despite the breakneck pace of M&A activity, not all proposed business combinations are getting a pass from regulators. Indeed, US antitrust agencies are taking an aggressive stance on deals deemed anticompetitive.
The Department of Justice and the Federal Trade Commission, which share responsibility for merger review under the Hart-Scott-Rodino Act, have scuttled a number of big deals this year, including GE’s proposed sale of its appliance division to Sweden’s Electrolux AB and foodservice giant SYSCO’s attempt to swallow archrival US Foods. The trustbusters are putting the brakes on others, suing to block several high-profile deals as top players in their industries seek to combine to conquer. Amid the scrutiny, deals are taking longer to complete, with the delays putting some of the proposed combinations in jeopardy.
Here’s a look at some unfinished M&As from 2015 that will drag on into 2016.
Walgreens / Rite Aid — Two of the top three US drugstore chains, Walgreens and Rite Aid, in October revealed plans to merge in a $17.2 billion (including debt) all-cash transaction. Regulators are concerned that the deal — which has been rumored for years and would create a drugstore chain with 12,800 locations — will stifle competition in certain markets and are likely to demand the sale or closing of several thousand stores. As of now, the companies have received a second request for additional information from the FTC in connection with their planned combination.
Staples / Office Depot — In a deal that would reduce the number of US office supply chains from three to one in relatively short order, Office Depot in 2015 agreed to be acquired by market leader Staples. The $6.3 billion deal, which closely follows Office Depot’s 2013 purchase of OfficeMax, is being pitched by Staples as a way to better compete against a large and diverse set of competitors, including mass merchants and online operators.
Regulators apparently aren’t too keen on having a single dominant US office supplies chain and are particularly concerned about the deal’s impact on commercial customers. The FTC has rejected Staples’ offer to divest more than $1 billion in commercial contracts in a bid to gain regulatory approval. An administrative trial to decide whether the deal can go through is slated to begin in May. Meanwhile, Staples is pursuing the transaction through litigation.
Anthem / Cigna and Aetna / Humana — Following a spate of deals in the insurance and health care industries set in action by the Affordable Care Act, health insurance giants Anthem and Cigna in July announced plans to merge in a $54 billion transaction. The largest-ever health insurance tie-up in the US, the Anthem-Cigna deal is under review by the Justice Department, which is also reviewing Aetna’s $37 billion takeover bid for fellow insurer Humana (announced in July). Federal and state regulators are working to determine if the deals will hurt patients and physicians.
Positive trends in the US economy bode well for continued strong M&A activity in 2016. Still, whether 2016 compares to frothy 2015 remains to be seen. Regulatory enforcement is likely to continue to be aggressive, with US antitrust agencies willing to take merger challenges to court.
Alexandra Biesada shops every day, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.