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Biden’s Antitrust Changes Have Added To Merger Investors’ Concerns

 |  August 5, 2021

US President Joe Biden’s tougher regulatory stance on big corporate mergers has fueled a rise in investor bets on some deals not being completed, reported Reuters.

Spreads between deal prices and the share prices of acquisition targets widened this week after the US Federal Trade Commission stated on Tuesday, August 3, that a surge in mergers and acquisitions (M&A) would delay antitrust reviews, and that companies that did not wait for their outcome completed their deals at their own risk.

Related: Biden’s Executive Order and the Shifting US Antitrust Landscape

On Wednesday, the Information reported that the US Department of Justice was weighing a lawsuit to block UnitedHealth Group’s nearly US$8 billion deal to acquire healthcare analytics and technology vendor Change Healthcare. Such a move would follow its lawsuit to block Aon’s US$30 billion acquisition of Willis Towers Watson, which resulted in the insurance brokerages abandoning their deal last month.

“The fact that spreads have widened is the understatement of the year,” said Roy Behren, managing member of Westchester Capital Management, which currently has US$5.1 billion of assets under management, 85% of which is invested in merger arbitrage.

Widened spreads include the proposed US$33.6 billion deal between railroad operators Canadian National Railway and Kansas City Southern, as both companies await approval from the Surface Transportation Board. Shares of Kansas City are currently trading at US$262 apiece, well below the agreed cash-and-stock deal of US$269 per share.

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