Norway rejects Prosafe-Floatel merger

Illustration only: A Prosafe accommodation rig / ©Prosafe

The Norwegian competition authorities have rejected the proposed merger between offshore accommodation companies Prosafe and Flotel.

The proposed combination would create the world’s largest owner of semi-submersible accommodation rigs with Prosafe currently owning and operating a total of nine offshore accommodation units, and has options for delivery of two newbuilds, while Floatel’s fleet counts five units.

The Norwegian Competition Authority said: “The Authority is of the opinion that the merger would lead to increased prices for customers of offshore accommodation services. The transaction involves the two largest and closest competitors on the Norwegian market for offshore accommodation services.”

“The Competition Authority is obliged to prohibit acquisitions that harm competition. We fear that buyers of accommodation services on the Norwegian continental shelf would have few or no competing suppliers in future tenders if the merger was allowed to proceed,” said Director General Lars Sørgard.

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, the authority said.

“Prosafe and Floatel are the two largest players on the market and there are few alternative suppliers. The Competition Authority is of the opinion that the parties only to a limited extent meet competition from other players,” said Sørgard.

Commenting on the decision by the Norwegian Competition Authority (“NCA”) Prosafe said: “Prosafe will study the decision in detail and expects to decide on whether to appeal shortly and within the deadline in 3 weeks.”

“We fear that buyers of accommodation services on the Norwegian continental shelf would have few or no competing suppliers in future tenders if the merger was allowed to proceed.”

The authority has noted that demand for offshore accommodation services has fallen since the fall in oil prices in 2014 and that  Prosafe and Floatel claim that absent the merger the current level of supply of offshore accommodation services would not be maintained.

“According to our market investigation, there will be a demand for offshore accommodation services in the coming years. The investigation has not revealed any convincing evidence suggesting that Prosafe and/or Floatel will withdraw from the Norwegian market if the merger is disallowed,” says Deputy Director Marita Skjæveland.

“Our assessment is that the parties will continue to compete for future contracts on the Norwegian continental shelf in absence of the merger,” she says.

During the investigation, 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.

As previously reported, the proposed merger raised similar concerns in the UK as well.

The UK Competition and Markets Authority’s investigation has found that 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. The CMA is therefore concerned that because of the deal, Prosafe and Floatel’s customers would face higher prices or lower quality offers when tendering for ASVs due to insufficient competition,” the UK competition authority said in September.

Offshore Energy Today Staff

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