OFT closed case: Anticipated acquisition by Turbo Alpha Limited of Abbot Group plc.
Affected market: Oil rig services
The OFT's decision on reference under section 33(1) given on 29 February 2008. Full text of decision published on 6 March 2008.
Turbo Alpha Limited (‘Turbo Alpha’) is a company owned by a fund,
FR XI-D Offshore AIV, L.P. which is ultimately controlled by FR XI
Offshore GP Limited and is advised by First Reserve Corporation. Turbo
Alpha was set up for the purpose of purchasing Abbot Group plc. One of
the portfolio companies controlled by the investments funds advised by
First Reserve Corporation, the Acteon Group Limited [See note 1]
(‘Acteon Group’), is active in a broadly similar sector to the target company.
The bulk of Acteon Group’s services are specialist engineering services, in
particular subsea and marine services such as the anchoring and mooring of
offshore oil and gas rigs.
Abbot Group plc (‘Abbot Group’) designs, constructs and operates oil rigs as main contractor (both onshore and offshore) mainly through its subsidiary KCA Deutag. In the last financial year the Abbot Group’s UK turnover was approximately £100 million.
Turbo Alpha will acquire Abbot Group by a scheme of arrangement. The parties notified the transaction on 4 February 2008 by a Merger Notice and the statutory deadline is 3 March 2008.
As a result of this transaction Abbot Group and Turbo Alpha will cease to be distinct. The UK turnover of Abbot Group exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is the case that arrangements are in progress which, if carried into effect, will result in the creation of a relevant merger situation.
The bulk of Abbot Group’s revenue is generated from designing, constructing and operating oil and gas rigs (both onshore and offshore), often as the main contractor. It typically provides a rig and a crew to an operating company (such as an oil or gas exploration company), and will drill wells to the depth and specifications set by that operator.
The bulk of the Acteon Group’s services are specialist engineering services, in particular subsea and marine services such as the anchoring and mooring of offshore oil and gas rigs. These services are not provided by the Abbot Group, which does not have the marine and structural engineering expertise that is required to provide these services.
The activities of the Acteon Group and the Abbot Group are broadly complementary (in that both parties provide services in the oil and gas exploration sector), but the OFT has found no evidence of any overlap between their activities and as a result no horizontal competition concerns are considered to arise.
The Acteon Group and Abbot Group do not operate at different levels of the supply chain in the oil and gas exploration sector, and so the merger does not give rise to any vertical issues.
In the absence of any horizontal or vertical overlap between the parties, the OFT has not considered it necessary to define the markets in which each party operates.
Consideration was given to the potential conglomerate effects of this transaction, in particular through the bundling of good and services. The parties submitted that they had no intention of bundling their products and services and that differences between each of their offerings made bundling inappropriate [See note 2]. No third party concerns of this nature were raised and one third party confirmed that the products and services each party offers are too varied to allow bundling.
None of the third parties, both customers and competitors, contacted by the OFT in course of its investigation raised any concerns about the merger.
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.
- The main subsidiaries of Acteon Group are: 2H Offshore Engineering Limited, Aquatic Engineering & Construction Limited, Chain Corporation and Construction Limited, Conductor Installation Services Limited, Claxton Engineering Services Limited, International Mooring Systems Limited, InterAct PMTI Inc., InterMoor Inc., MENCK GmbH, Mirage Machines Limited, Seatronics Limited, TEAM Energy Resources Limited, Trident Offshore Limited, UWG Limited, WellCut Group Inc.
- Acteon Group provides subsea products and services to offshore oil and gas facilities. Acteon Group's products and services are provided either before or after the provision of drilling contracting. These products and services are not related to the provision of drilling contracting or to the manufacture of land drilling rigs. KCA Deutag provides contract drilling services, which are not related to the provision of subsea products and services.