So far, not even a speed bump; but could become more substantial later. For those who would rather not see this merger happening, this is (a very small bit of) good news.
As a routine M&A matter, the Federal Trade Commission (FTC), examines all major mergers to see if they reduce marketplace competition (and some other issues, but anti-competitiveness is the main concern). While the FTC may outright block a transaction, more commonly they require the merged entity to divest competing products. Merging companies often divest such before even starting the process.
In the Nestle transaction, Valeant divested some Allergan-competing products and implied that this should suffice for the FTC. Apparently, the FTC is not quite ready to clear out of the way. They asked both Valeant and Allergan to provide more information.
As this is a hostile situation, expect Valeant to quickly respond with detailed explanation arguing that there is no problem (and, potentially, promise to divest additional products once the merger completes); and expect Allergan to take the maximum time allowed and respond with the opposite agenda. In any event, Valeant and its allies need to gain control of the Allergan Board to win this takeover battle, and if they do, then the new (pro-merger) board will respond to the FTC with a similar line as Valeant.
Once Allergan and Valeant responded to the FTC information request, the FTC has 30 days to approve or block (the merger can't happen before the 30 days expire). If the FTC says nothing, it's the same as approving. Since the various other delay mechanisms already in place (shareholder meeting delay, insider trading lawsuit delay, etc.) are on much longer time scales, unless this FTC action is the harbinger of future issues, I don't expect this to add to any of the timelines -- so not even a speed bump.
Even if the FTC does decide to intervene, it will probably be no more than extracting some promises out of Valeant as a condition to approve (not likely a huge deal, but every such promise or divestiture reduces the profitability of the deal and therefore the likelihood it will happen).
The FTC has been under political pressure to scrutinize this transaction, and may yet select to play a more assertive role. For now, if I may conjecture some motivations, the FTC is doing the minimum they can without tipping their hand. They are neither giving the all-clear, nor blocking or slowing the transaction. This way, if the transaction fails on it's own, they would have skirted this minefield without enraging either side. If it doesn't, then, at some point, the FTC will have to decide if they want to interfere or stay clear.
Dan.
