Four Mega-Mergers Hang Over Into New Year

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By Eleanor Tyler

Four long-pending mega-mergers, including AT&T Inc.'s bid for Time Warner Inc., aren’t likely to emerge this year untouched by their months-long regulatory reviews.

Parties to three of the four deals have already said they’ve received second requests for information from antitrust regulators, and the companies’ lawyers are presumed to be working to negotiate settlements that mollify agency concerns.

AT&T and Time Warner have yet to say whether a second request has been received, but even if one hasn’t, President-elect Donald Trump has already threatened to derail the approval process.

Here is a rundown of four pending mega-deals expected to close in early 2017.

AT&T Inc.-Time Warner Inc

AT&T’s $85.4 billion bid to take over Time Warner was the largest merger announced in 2016.

On the campaign trail, Trump said he would block the proposed tie-up because it would concentrate too much power in an already consolidated industry.

The merger has also garnered opposition from three lawmakers at a Senate Judiciary Antitrust Subcommittee hearing in December.

Sen. Amy Klobuchar (D-Minn.), ranking member of the subcommittee, said the merger might undermine competition and drive up prices for consumers. Sen. Al Franken, (D-Minn.) and Sen. Charles Grassley (R-Iowa) also spoke out against the merger at the hearing.

The parties have a year to close the deal, per their agreement. As such, if the deal is still under regulatory review as of Oct. 22, either party can ask to extend the deadline to April 22, 2018.

AT&T said in securities filings that it’s too early to tell if the Federal Communications Commission will also have to review the deal. FCC involvement hinges on whether AT&T will need to assume licenses held by Time Warner. It’s also unclear which antitrust enforcer will review the deal, although DOJ is the presumed pick due to its expertise in the telecom arena.

Dow Chemical Corp.-DuPont Co

This merger, unveiled in December 2015, has dragged past its expected closing date in a protracted review. The companies now estimate it will close during the first quarter of 2017.

Billed as a merger of equals, Dow and DuPont had a combined market capitalization of around $130 billion when deal was inked. DuPont and Dow intend to break the combined company into three separate, publicly-traded companies through tax-free spin-offs 24 months after closing.

The companies have argued that the deal presents few competitive concerns because their businesses have minimal market overlap.

Regulators, however, have to predict the impact of the merger along with other potential shifts in agriculture and chemicals markets, which could be transformed by additional proposed mergers between China National Chemical Corp. (ChemChina), a Chinese-owned chemical company, and Syngenta AG, and Bayer AG and Monsanto Co.

Such a fluid market structure makes it difficult for regulators to handicap how markets will be affected by any one deal, including Dow Chemical-DuPont.

The parties filed for U.S. clearance Jan. 27, 2016, and received a second request from the Department of Justice a month later.

The European Union began its review Aug. 11, 2016, but has suspended it twice, saying the parties failed to provide requested information. The current deadline for an EU decision is Feb. 28.

Australian and Brazilian authorities are also reviewing the deal.

The merger agreement says the deal must close by March 15, although either party can extend that deadline to June 15 if the only impediment to closing is antitrust approval of the deal.

The Sherwin-Williams Co.-Valspar Inc

Sherwin-Williams and Valspar announced a cash deal worth $11.3 billion March 2016. The Federal Trade Commission, which is reviewing the deal, issued a second request in May.

The Sherwin-Williams and Valspar deal faces scrutiny in the U.S. paint sector. The deal will create the world’s largest paint and coatings provider with projected revenues of nearly $16 billion and eliminates one of four big house paint competitors in the U.S. The combined company would compete only with PPG Industries Inc. and Masco Corp.

The agreement itself foresees divestitures being required to get the deal through: The agreement allows Sherwin-Williams to drop its bid for Valspar from $113 per share to $105 per share if at least $650 million in divestitures are necessary. Sherwin-Williams can walk away from the deal entirely at $1.5 billion in divestitures.

The agreement also specifies that Sherwin-Williams will not sell its Krylon and Ronseal paint brands to save the merger.

The parties have twice responded to “unfounded market rumors” that the deal is in trouble, and maintain they expect to close in the first quarter of 2017 with minimal divestitures.

The deal cleared the EU in August to little fanfare.

Walgreens Boots Alliance Inc.-Rite Aid Corp

Walgreens and Rite Aid announced a $17.2 billion all cash deal at the end of October 2015. The merger would create the largest drug store chain in the U.S., leapfrogging CVS Health Corp.

While the companies had expected to close by the end of 2016, Walgreens said in filings that the deadline had been extended through Jan. 27, 2017.

The agreement doesn’t allow for further extension. If Jan. 27, 2017, passes without the deal achieving antitrust clearance, either party can pull out. They got a second request from the FTC in December 2015.

To allay FTC concerns, the parties recently said they’d sell 865 stores to Fred’s Pharmacy for $950 million. Fred’s would be on the hook for any additional stores the FTC orders divested, as well.

If the companies are required to shed more than 1,000 stores to get approval, Walgreens has the option to walk away from the merger agreement with Rite Aid.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bna.com

To contact the editor responsible for this story: Tiffany Friesen Milone at tmilone@bna.com

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