This decision by the Competition and Markets Authority (CMA) follows an in-depth Phase 2 investigation into the deal.
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 two of just four 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.
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.
Competition needed to avoid higher prices or poor-quality services
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 four effective competitors remain in the market.
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.”
For more information, visit the CHC / Babcock merger inquiry page.