(Alliance News) - The UK regulator on Wednesday cast doubt on NortonLifeLock Inc's takeover of London-listed cybersecurity peer Avast after finding the combination could reduce competition.
Avast PLC shares dropped 12% to 571.20 pence each on Wednesday morning in London, underperforming the wider FTSE 100 index which was up 1.2%.
Tempe, Arizona-based NortonLifeLock had agreed back in August to buy Prague-based Avast in a cash-and-shares deal worth USD8.6 billion at the time. UK antitrust clearance was the only remaining regulatory condition for the deal, which had been expected to close on April 4.
At the start of 2022, the UK Competition & Markets Authority announced that it launched an inquiry into Avast's takeover by Norton, to investigate if the potential merger would reduce competition in the UK. It had until Wednesday to make its phase 1 decision.
The competition watchdog has decided that "it is or may be the case that this merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the UK."
The CMA explained that Avast and NortonLifeLock are "close competitors, with few other significant rivals".
The regulator said NortonLifeLock and Avast now have five working days to submit proposals to address its concerns, or it will refer the merger to a in-depth phase 2 investigation.
Norton described the decision by the CMA as "surprising."
"The parties believe that the merger can only benefit consumers across the globe, including in the UK, through increased innovation and greater consumer freedom and choice beyond big tech platform providers in the burgeoning cyber safety market," it explained.
Norton continued that the merger has been cleared by regulators in the US, Germany and Spain.
"NortonLifeLock remains confident that the merger should be approved and does not intend to propose any phase 1 remedies," it said. "The parties will continue to engage constructively with the CMA and their review."
Due to the impasse, the two companies said they now expect the acquisition to complete in "mid-to-late 2022".
By Abby Amoakuh; abbyamoakuh@alliancenews.com
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