Would the transaction be allowed under U.S. and EU anti-trust laws?
On its face, this would have a hard time passing anti-trust. The combined entity would control over 60% of ETF assets under management, and that is generally not something lawmakers look favorably on. Of course, Vanguard is the "Great Disrupter," and even in this endeavor, its track record of consistently enhancing the investor experience would work in its favor. The other providers will not be happy about this, and we would expect a political dogfight.
How could a merger impact ETF investors?
From an ETF user's perspective, the potential merger of these two groups is mixed, mostly depending on how you use ETFs. The biggest detraction would be that this could potentially stifle competition in the ETF space. We would go from three sizable providers (SPDRs, iShares, and Vanguard) down to two. Countering that concern is the fact that Vanguard has a history of reducing costs for investors and enhancing the investor experience in every market that it has entered. If Vanguard were to lower the fees on some of iShares' more liquid products or merge them with Vanguard's lower-cost vehicles, then we would see a tremendous benefit for long-term ETF investors.
Full Story: http://news.morningstar.com/articlenet/article.aspx?id=293582