The UK Competition and Markets Authority (CMA) said Wednesday that offshore helicopter operator CHC must unwind its completed acquisition of Babcock’s oil and gas offshore helicopter services to address competition concerns.
"CHC provides offshore transport in the oil and gas sector, including taking workers to and from rigs in the UK North Sea. Prior to the merger, Babcock also provided these services. The CMA found that the parties were 2 of just 4 suppliers of oil and gas offshore helicopter services in the UK and provided an important competitive constraint on each other.
The loss of this constraint would significantly reduce rivalry between an already limited number of suppliers. As a result, the CMA has found that the merger would lead to significant competition concerns in the UK’s oil and gas offshore helicopter services market," CMA said.
"In assessing competition in the supply of oil and gas offshore helicopter services in the UK, the CMA engaged with customers, competitors and other industry players. The CMA reviewed data on bidding for previous contracts, which indicated that the parties frequently bid against each other, and reviewed business strategy documents that showed that the parties considered each other to be significant competitors," CMA said.
"To address its concerns, and to restore competition to pre-merger levels, the CMA requires CHC to sell the UK oil and gas offshore helicopter services business it bought from Babcock. The sale of this business will ensure that 4 effective competitors remain in the market," CMA said.
Kip Meek, Chair of the CMA inquiry group, said: "Offshore oil and gas are important industries for the UK, and helicopter companies play a vital role in transporting workers safely to and from oil rigs. While the industry faces commercial challenges, UK customers continue to spend hundreds of millions of pounds on offshore helicopter services each year. Competition is vital to avoid higher prices or poorer quality, problems that ultimately increase costs to UK consumers. The sale of Babcock’s UK oil and gas offshore helicopter services business will support competition in future tenders for these important services."
Offshore helicopter transportation company CHC in September 2021 said it had completed the acquisition of Babcock International’s offshore oil and gas aviation business.
The acquisition, first announced in March 2021, increased CHC's offshore crew transportation capacity and expanded its fleet by around 30 aircraft across the UK, Denmark, and Australia.
While the two companies announced the completion of the deal in September last year, CHC still needed some regulatory approvals.
"Babcock International’s operations in the UK, Australia, and Denmark will be held separately and operate independently from CHC, while CHC seeks approval from the relevant competition authorities in the UK and Australia," CHC said at the time.
Offshore Engineer reached out to CHC, seeking a statement on CMA's decision. The company did not reply.
Reuters, however, managed to obtain CHC's statement, according to which, the offshore helicopter company is 'disappointed.'
According to Reuters, CHC said it would be analyzing the final report before deciding on the next course of action.
"CMA has fundamentally failed to understand the vital need for consolidation in what is a highly challenging market environment," CHC said, Reuters reported.