The UK Competitions and Market Authority (CMA) has concluded its investigation into the acquisition of Babcock’s UK, Denmark and Australian operations by the U.S.-based operator CHC Group (CHC). As a consequence, the CMA has informed CHC it must divest itself of all UK-related oil and gas operations, citing the acquisition’s adverse effect on rivalry.
CHC purchased Babcock’s oil and gas aviation business in September 2021 for £10 million and the demand by the CMA does not affect other elements of the business. In April this year CHC had approached the CMA with the suggestion of a partial sale of UK-based operations to help mitigate concerns the regulatory body had over a lack of competition, but this was rejected. CHC had argued that while a perceived lack of competition may not be to the CMA’s liking, the market sector is struggling with oversupply and loss-making contracts after two market downturns. Babcock posted a pre-tax loss of £383 million in 2021. CHC has stated 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”.
Chair of the inquiry, Kip Meek, said the sale [of Babcock’s UK oil and gas operations] “will support competition in future tenders for these important services.”
In response to the CMA’s demand, CHC said: “We are disappointed by the CMA’s decision. The CMA has fundamentally failed to understand the vital need for consolidation in what is a highly challenging market environment. With that said, we are looking forward to integrating the Australia and Denmark business at the appropriate time. “We will be analysing the CMA’s Final Report in more detail before deciding on next steps. In the meantime, our operation continues as usual with a continued focus on delivery of safe and efficient services to our customers.”