Avast tumbles as NortonLifeLock merger faces competition probe

Shares in Avast fell sharply on Wednesday after the UK competition watchdog said the firm's proposed $8.6bn takeover by NortonLifeLock was facing a full investigation.

The two firms, both specialists in cybersecurity software, first announced the stock and cash deal last August. It was initially expected to close in February but that was pushed back to April as they waited on regulatory approval in the UK and Spain.

The Competition and Markets Authority first began assessing the deal in January, and on Wednesday said it feared a tie-up could hit consumers as the two companies were close competitors with few significant rivals.

David Stewart, CMA executive director, said: "We are living more of our lives online and it is vital that people have access to competitive cyber safety software.

"NortonLifeLock’s proposed purchase of Avast could lead to a reduction in competition in the UK, and ultimately a worse deal for consumers when looking for cyber safety software.

"Unless the companies can offer a clear-cut solution to address our concerns, we intend to carry out an in-depth phase 2 investigation."

As at 1100 GMT, shares in Prague-based Avast - which floated on the London market in 2018 - had lost nearly 12% at 571.0p. Shares in US firm NortonLifeLock, formerly known as Symantec, were down 7% in pre-market trading.

NortonLifeLock and Avast now have five working days to submit proposals to address the CMA’s concerns. The regulator will then have five working days to decide whether to accept the proposals or refer the deal for an in-depth investigation.

However, NortonLifeLock - which called the CMA’s decision “surprising” - said it would not be proposing any phase 1 remedies.

“We believe this transaction can only benefit consumers across the globe, including the UK, through increased innovation and greater consumer freedom and choice beyond the big tech platform providers,” it argued.

“Regulators from across the globe, including the US Department of Justice, the German Federal Cartel Office and the Spanish National Markets and Competition Commission have reviewed and cleared the transaction.

“NortonLifeLock remains confident the transaction should be approved and does not intend to proposed any phase 1 remedies.”

It would, however, continue to “constructively engage” with the CMA and its review.

Victoria Scholar, head of investment at Interactive Investor, said: "The regulator’s involvement creates a spanner in the works for the $8.6bn acquisition of Avast.

"Given the backdrop of tensions between Russia and Ukraine, and fears of cyber warfare, cyber security products are more important than ever, potentially contributing to this aggressive response from the CMA, which both sides will be keen to respond to in a way that will breathe life back into the deal."