The election of President Trump is certain to bring about significant regulatory changes in key US industries like energy, healthcare, and finance. One field that looks entirely uncertain to me: mergers. As fellow Seeking Alpha contributor Chris DeMuth has pointed out, cross-border M&A could come under fire, particularly if the Trump administration is skeptical about allowing foreign capital to acquire US assets. However, the merger between Rite Aid (NYSE:RAD) and Walgreens (NASDAQ:WBA) could be another story. I believe the story will be intentionally prolonged as the companies wait for Trump/Republicans to take control. Overall, I have increased my odds from a 65% chance of occurring to a 75% of happening under the new administration, though the IRR will be lower. Below are a few key factors that I think change and improve the likelihood of deal completion.
Factor #1: Obama Administration has been tough on retail mergers
We need to look no further than the Staples (NASDAQ:SPLS)-Office Depot (NYSE:ODP) merger to know that the Obama Administration has placed high value on retail remaining competitive. Here we have two companies with highly uncertain futures that likely needed to merge to squeeze out a few additional years of existence, yet the government squashed the merger.
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Earlier in the Obama Administration, the merger between AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) was struck down. Ultimately, this created a strong and motivated competitor in T-Mobile that has positively impacted the competitive landscape for consumers in the mobile space. I suspect the current regulatory regime points at this as a prime example of anti-trust legislation having a positive impact on the consumer.
Therefore, we have a strong legacy (and some rationale) for the outgoing administration to be tough on retail mergers. Based on prior comments and targeting divested store amounts, I think the current Administration believes eliminating too many Rite Aid stores creates a competitive landscape that is far too favorable for CVS (NYSE:CVS) and Walgreens.
Fuente: Seeking Alpha
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