CHC forced to sell Babcock offshore
The UK Competition and Markets Authority (CMA) has told CHC to sell the UK parts of the Babcock offshore business it acquired last year.
The CMA felt that oil companies benefitted from having four competitors and that losing one would significantly reduce competition.
“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,” said Kip Meek, chair of the CMA inquiry group. “The sale of Babcock’s UK oil and gas offshore helicopter services business will support competition in future tenders for these important services.”
CHC can still keep Babcock’s divisions in Australia and Denmark, but these are a relatively small part of the acquisition. The CMA says that 70% of Babcock’s offshore business came from the UK.
In its final report, the CMA said that it did not expect new entrants: “Our view is that the combination of a decline in the industry to date, an unclear path to recovery of the O&G [oil and gas] market, alongside low margins and significant barriers to entry, means that it is unlikely that new entrants will be looking to enter the market in response to the Merger or that there will be significant expansion of suppliers in the market.”
Lessors – including Milestone Aviation – submitted reports arguing for the merger. But the CMA has stuck by its original findings that were issued in March 2022.
It says: “We have decided that only divestiture of Offshore UK to a suitable purchaser would be an effective remedy to address the SLC and the harm it would cause to competition, and that requiring this would not be disproportionate. A suitable purchaser therefore must be found.”