World’s largest offshore accommodation company formation Ruled Out by Norwegian Authorities
The Norwegian Competition Authority declined the accommodation vessel operators, Prosafe and Floatel, merger and stuck with its previously raised concerns
Prosafe SE and Floatel International Ltd (“Floatel”), come to an agreement to merge their respective businesses to deal with challenges and changing market, in June.
However, the Norwegian Competition Authority is of the opinion that, “the merger would lead to increased prices for customers of offshore accommodation services.”
The Competition Authority’s decision was sent to the parties today.
Although, Prosafe believes that, “A merged company will have the most modern and flexible fleet in the global market, with lower costs, increased geographical presence and a strengthened customer offering.”
Combining Prosafe’s existing nine semi-submersible vessels and options for two newbuild semi-submersible vessels with Floatel’s five semi-submersible vessels, makes them worlds leaders in accommodation units.
The transaction involves the two largest and closest competitors on the Norwegian market for offshore accommodation services
Norwegian Authority said, Prosafe and Floatel are the only suppliers of modern semi-submersible accommodation units on the Norwegian continental shelf. Accommodation units offered by other suppliers on the Norwegian continental shelf are not fully comparable to those offered by the parties. Other suppliers are therefore not able to compete for all contracts.
According to Authorities, the demand for offshore accommodation services has fallen since the fall in oil prices in 2014.
The parties claim that absent the merger, the current level of supply of offshore accommodation services would not be maintained.
The Competition Authority has in the course of its investigation collected substantial information from the parties, customers and other market players.
We reported earlier on 1st of September that, the merger is facing a setback, as the CMA has found that the proposed deal between Floatel and Prosafe raises competition concerns in the supply of offshore accommodation.
Furthermore, the Regulator expressed in September that, if the merging businesses are unable to address the CMA’s concerns, the deal will be referred for an in-depth Phase 2 investigation, to be carried out by a group of independent CMA panel members.
As we reported earlier, according to UK’s CMA investigation findings, Prosafe and Floatel are the 2 largest suppliers in the market, owning the vast majority of semi-submersible offshore accommodation in North West Europe. They compete closely with each other and have consistently won the most contracts over time. Aside from the merging businesses, there are limited alternatives available to customers at present.
During the investigation by Norwegian Authorities, Prosafe proposed remedies with a view to remove the negative effects on competition that would result from the merger. However, these remedies were not sufficient to eliminate the competition concerns identified by the Authority.
The Authority’s decision can be appealed to the Competition Tribunal within three weeks.
In a separate statement, Prosafe commented that “Prosafe will study the decision in detail, and expects to decide on whether to appeal shortly and within the deadline in 3 weeks.”
