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.