The OFT announced on 17 August 2011 that it has accepted
undertakings from Acergy to dispose of a pipelay vessel in order to
address competition concerns arising from the completed acquisition
of Subsea 7 Inc by Acergy S.A. (since renamed Subsea 7 S.A.). As a
result, the merger will not be referred to the Competition
Commission (CC). Under the terms of the undertakings, the
pipelay vessel, the Acergy Falcon, will be sold to Grup Servicii
Petroliere SA (GSP).
The merger between Acergy and Subsea 7 was announced in June 2010
and was stated to be subject to regulatory approvals. In
December 2010, the OFT announced that it was investigating the
merger.
Under the Enterprise Act 2002, the OFT has jurisdiction to
investigate a merger if either (i) the turnover in the United
Kingdom of the enterprise being taken over exceeds £70
million, or (ii) as a result of the transaction, in relation to the
supply of goods or services of any description, a 25 per cent
market share in the UK (or a substantial part of it) is created or
enhanced. However, the OFT will only refer a merger to the
Competition Commission for a more detailed investigation if the OFT
believes that the relevant merger may be expected to result in a
substantial lessening of competition in any market for goods or
services in the United Kingdom.
Acergy and Subsea 7 overlap in the provision of certain offshore
oilfield services. In the North Sea, the parties each use different
types of vessels (or a combination of vessels) to provide a range
of services for certain kinds of projects including diving,
pipelay, construction and remote intervention services. The OFT
concluded that the acquisition would not give rise to concerns in
relation to the supply of services for diving or construction and
remote intervention projects because the merged firm would continue
to face significant competition from a number of other service
providers in these specific areas.
However, as concerns were raised by a number of third parties, the
OFT also assessed the extent of overlap in the supply of services
for pipelay projects in the North Sea, including integrated pipelay
and diving services. It found that the merger would raise
competition concerns in relation to the provision of small diameter
rigid pipelay services alone and projects which require the
provision of both small diameter rigid pipelay and diving services.
The investigation showed that Acergy S.A. and SubSea 7 Inc are two
of three major firms who compete closely in these two areas.
In order to address these competition concerns, the parties offered
to make undertakings to divest a pipelay vessel and if necessary a
diving vessel but it appears that the OFT concluded only the former
was necessary in order to address the competition concerns
– more detail may emerge when the OFT publishes its full
decision in due course. Under the Enterprise Act 2002, the
OFT may accept appropriate undertakings from the parties concerned,
instead of making a reference to the CC, in order to remedy,
mitigate or prevent the substantial lessening of competition which
has been identified as a risk of the merger, or any of the expected
results of it.
The OFT made it clear that it would suspend the duty to refer and
consider undertakings only if the parties were able to identify an
upfront buyer for the Acergy Falcon. The agreement of a provisional
sale to GSP meant that the OFT was able to consult publicly on the
suitability of GSP as the proposed purchaser, as well as other
aspects of the draft undertakings, during the public consultation
period. This included ensuring that GSP had formed an
association with Bibby Offshore Holdings Limited - a provider of
Diving Support Vessels - allowing the two firms to jointly offer
pipelay services with diving services in the North Sea.
This case is a reminder that even where two businesses are largely
complementary, the competition authorities will take seriously
concerns by affected parties relating to areas of overlap in quite
narrow markets and may, in appropriate cases, require action to
address these. However, by early and strategic concessions,
parties can avoid the need for a time consuming CC inquiry.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 22/08/2011.