CMA probes Babcock’s £10m sale of oil and fuel helicopter enterprise
UK competition watchdog is set to review the £ 10 million sale of defense and engineering giant Babcock International Group Plc’s oil and gas aviation business.
The Competition and Markets Authority (CMA) said it would look into whether the deal could significantly reduce competition in the UK. As part of the sale, the helicopter service specialist CHC Group LLC acquired a company that uses helicopters to transport crews to offshore oil platforms.
However, the CMA will now examine whether the transaction may have violated the merger law and reduced competition in the market, and is encouraging all “interested parties” to comment on the transaction by October 7, 2021.
The CMA said: “The Competition and Markets Authority is examining whether this transaction has resulted in a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted in a significant reduction in competition in one or more markets listed or expected in the UK for goods or services. “
Babcock completed the sale in early September while the company continues to work on a “turnaround plan” to cope with financial losses. It came just weeks after Babcock, which operates the huge Devonport shipyards in Plymouth and Rosyth, Scotland, sold Frazer-Nash Consultancy to American engineering giant KBR for £ 293 million. And it followed shortly afterwards that Babcock sold its stake in the aviation services company AirTanker Holdings Ltd for £ 126 million.
The helicopter business, which was at the center of the CHC deal, was part of Babcock’s aviation sector and provided offshore transportation services for oil and gas personnel in the UK, Denmark and Australia.
It is headquartered in Aberdeen, Scotland, employs more than 500 people and operates approximately 30 aircraft in its three locations.
For the year ended March 31, 2021, the company had sales of £ 154 million, a pre-tax loss of £ 2 million and an underlying operating profit of £ 2 million. As of March 31, 2021, it had gross assets of £ 256 million, net assets without cash of £ 21 million and net lease liabilities of £ 142 million.
The sale was part of Babcock’s targeted divestment program aimed at generating at least £ 400m. The proceeds from this transaction will be used to reduce the company’s net debt. In July 2021, Babcock reported an operating loss of $ 1.64 billion.
In August 2021, Babcock sold Frazer-Nash Consultancy to KBR, an American engineering giant.
The consultancy, which works on submarine design and naval weapons, among other things, was part of Babcock’s marine sector, which focuses on its operations in Devonport.
The company employs approximately 900 people in the healthcare, energy, defense and transportation sectors and has nine UK locations including Millfields in Plymouth.
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In September Babcock entered into a definitive agreement with Equitix Investment Management Ltd to sell its 15.4% stake in AirTanker Holdings, a joint venture with Airbus, Thales and Rolls-Royce, which also owns its stake in AirTanker Holdings for £ 189 million sold to Equitix.
AirTanker Holdings owns 14 A330 Voyager aircraft providing air refueling, air transport and support services to the UK Department of Defense. Babcock retains its 23.5% stake in AirTanker Services Limited, which operates these aircraft. AirTanker Holdings is part of Babcock’s aerospace sector and is managed by Babcock as an associate. The transaction is expected to be completed by the end of this fiscal year and is subject to regulatory approvals given the industry in which AirTanker Holdings operates. There is no merger control requirement. The remaining AirTanker shareholders have a right of first refusal on the Babcock shares.
