U.K. Requires CHC to Unwind Helicopter Services Deal

Article retrieved from verticalmag.com

The CHC must unwind its completed acquisition of Babcock’s oil-and-gas offshore helicopter services to address competition concerns. The Competition and Markets Authority (CMA) decision follows an in-depth Phase 2 investigation into the deal.

CHC provides offshore transport in the oil and gas sector.

UK Government Photo

CHC provides offshore transport in the oil and gas sector, including taking workers to and from the U.K. North Sea rigs. 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 U.K. 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 U.K.’s oil and gas offshore helicopter services market.

In assessing competition in the supply of oil and gas offshore helicopter services in the U.K., 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.

To address its concerns, and to restore competition to pre-merger levels, the CMA requires CHC to sell the U.K. 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.

Kip Meek, Chair of the CMA inquiry group, said: “Offshore oil and gas are important industries for the U.K., 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 U.K. consumers.”

The sale of Babcock’s U.K. oil and gas offshore helicopter services business will support competition in future tenders for these important services.

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