CMA demands CHC to cancel helicopter service deal
CHC must wind down its completed acquisition of Babcock, an offshore oil and gas helicopter service company, to address competition concerns.
This decision by the Competition and Markets Authority (CMA) follows an in-depth Phase II investigation of the deal.
CHC provides offshore transportation in the oil and gas sector, including transporting workers to and from rigs in the U.K. North Sea. Babcock also provided these services before the merger. CMA found that the parties were 2 of 4 providers of helicopter services for oil and gas in the UK and created an important competitive constraint on each other. Losing this constraint would have greatly reduced competition between an already limited number of suppliers. As a result, the CMA concluded that the merger would lead to serious competition problems in the UK market for offshore oil and gas helicopter services.
In assessing competition in the provision of offshore helicopter services for oil and gas extraction in the UK, the CMA interacted with customers, competitors and other industry players. The CMA reviewed bidding data on previous contracts, which showed that parties often bid against each other, and reviewed business strategy documents, which showed that parties viewed each other as serious competitors.
To address its concerns and restore competition to pre-merger levels, CMA is requiring CHC to sell the British oil and gas offshore helicopter business it bought from Babcock. The sale of this business will ensure that it retains four effective competitors in the market.
Kip Meek, chairman of the CMA research 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 annually on offshore helicopter services. Competition is vital to avoid higher prices or lower quality, problems that ultimately drive up costs for British customers.
Babcock’s sale of the British oil and gas helicopter service business will support competition in future tenders for these important services.