The Competition and Markets Authority (CMA) has found that CHC's £10m acquisition of Babcock’s helicopter business raises competition concerns.
The aerospace, defence and security company's Aberdeen-headquartered division provides offshore oil and gas crew transportation services in the UK, Denmark and Australia.
It employs more than 500 people and operates around 30 aircraft across three locations.
For the year ending 31 March 2021, the division had revenue of £154m, a loss before tax of £2m and underlying operating profit of £2m. The unit also had gross assets of £256m, net assets excluding cash of £21m, and net lease liabilities of £142m.
Following an in-depth investigation of the deal, the regulator provisionally found that the merger would lead to a significant loss of competition in the market.
CHC and the acquired businesses both provide offshore transportation in the oil and gas sector, including taking workers to and from rigs in the North Sea.
The CMA’s investigation analysed a range of evidence, including data on bidding for previous contracts and hundreds of internal documents.
It also engaged with customers, competitors and other industry players to inform provisional findings.
The evidence gathered shows that the UK arm remains an effective competitor, and the loss of this competition would significantly reduce rivalry between an already limited number of suppliers.
It found the merger would reduce the number of suppliers from four to three and the CMA does not believe that new players are likely to enter the market.
The CMA is accepting responses from interested parties to its provisional findings by 7 April and its notice of possible remedies, which sets out potential options for addressing its provisional concerns, by 31 March.
It will be considered ahead of the CMA issuing its final decision, which is due by 15 May this year.
Kip Meek, chair of the CMA inquiry group, said: “We’re concerned that this merger will reduce competition in a market which currently only has four competitors and that is vital to the smooth running of the North Sea oil and gas industry.
“Our findings are provisional at this stage, and we welcome further responses from CHC and Babcock, as well as from other interested parties.”
A spokesperson for CHC said: “When it completed the Babcock acquisition in September 2021, CHC understood that integration would be subject to approval from the CMA.
“While we are disappointed and strongly disagree with the findings published by the CMA today, we note that, as the CMA itself has made clear, these findings are provisional at this stage and we will continue to work hard to address the concerns that have been expressed.”
It added that the merger “takes place in the context of an extremely challenging market which has gone through a prolonged downturn”, in which demand has significantly declined, “leaving an over-supply of helicopters and in which the customers exercise substantial leverage over the operators”.
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