An in-depth Competition and Markets Authority (CMA) review has provisionally found that the proposed merger between Prosafe and Floatel raises competition concerns.
According to the UK CMA, both companies supply semi-submersible offshore accommodation support vessels (semi-submersible ASVs) to oil and gas companies, which are consequently used to provide accommodation space for employees working offshore and are a key facility for some types of work in the North Sea.
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It is said that as part of an in-depth Phase 2 investigation led by an independent group of panel members, the CMA has found that Prosafe and Floatel are the 2 largest suppliers in the market, owning the vast majority of semi-submersible ASVs operating on the UK Continental Shelf and the Norwegian Continental Shelf.
Based on the evidence so far, the CMA has provisionally found that the merger may result in a substantial lessening of competition and customers may face higher prices, and/or lower quality when tendering for semi-submersible ASVs.
It is said that Prosafe and Floatel compete closely with each other and have consistently won the most contracts over time, and that there are limited alternatives available to customers at the time.
The CMA further examined strategy documents from the two companies which show how they consider each other to be close competitors. There was also data available on how often the firms compete head to head in bidding for tenders.
The CMA is consulting on solutions to these provisional findings and views are invited by 6 February 2020. Whatsoever, its initial view is that blocking the merger may be the only way of addressing these competition concerns.
Kirstin Baker, the Inquiry Chair, commented that “Prosafe and Floatel are the two biggest suppliers of this type of specialist accommodation to oil and gas companies operating in the North Sea,” adding that
Based on the evidence we have seen so far about a lack of real alternatives to the two firms, we are concerned that companies tendering for staff accommodation in this area would face higher prices, or lower quality offers due to insufficient competition as a result of the merger. Our initial view is that blocking the merger may be the only way of addressing these concerns.
According to a recent statement,
Prosafe will study the conclusions and supporting arguments in detail ahead of the deadline for responding by 20 February.
On their part,
Floatel International will study the conclusions and supporting arguments in detail ahead of the deadline for responding by 20 February 2020.
CMA has worked together with the Norwegian Competition Authority (NCA) on this case as it carried out a separate review into the deal.
The NCA’s decision to block the merger is currently being appealed to the Norwegian Competition Tribunal.
The CMA’s final report will be issued by 23 March 2020.
