The trustees of the £181.2mn CHC Scotia Pension Scheme have told the Competition and Markets Authority that its recent intervention risks being “seriously detrimental to the interests of the scheme and its members”.
The competition watchdog has recommended that helicopter services business CHC, which acquired defence engineer Babcock’s international offshore oil and gas aviation business in September 2021, sell either part or the whole of the “Fisher Business” in order to address its concerns of the competitiveness of the market.
Previously owned by Babcock International, the Fisher Business comprises UK, Australasian and Danish offshore helicopter businesses.
The CMA believes that the merger would lead to a substantial weakening of competition in oil and gas offshore transportation services in the UK.
A forced disposal of the Fisher Business… could have severe consequences to the scheme and its members
Ian Gordon, CHC Pension Scheme
CHC disputes this conclusion. In response to the CMA’s provisional findings, it said that the watchdog’s decision was “based on fundamental errors of analysis” that “do not reflect competitive dynamics and market realities, and are based on an incomplete and selective (and therefore deficient) assessment of the evidence as a whole”.
In an email to the CMA dated April 7 and published on May 23, Ian Gordon, CHC Scotia Pension Scheme trustee chair, noted that the scheme’s covenant support, which is primarily provided by CHC Scotia, has been affected by oil price weakness and volatility, which has led to a slump in helicopter demand from oil and gas producers.
This support has also been impacted by “significant helicopter overcapacity, which resulted in distressed operators continuing to drive down prices to new lows”.
“In today’s depressed market, CHC’s acquisition of the Fisher Business provided some optimism for the trustees,” Gordon wrote, observing that the deal would help to counter the market’s oversupply of helicopters.
“The Fisher Business was heavily loss making over a number of years prior to its acquisition by CHC,” he said, with the trustees believing that the deal was not motivated by a desire to “make excessive profits”.
“A sale transaction would have very material and adverse implications for the scheme and its beneficiaries and is likely to be of concern to the Pensions Regulator.”
TPR has been approached for comment.
The trustee observed that the Competition Commission, a former UK competition watchdog, previously waved through two of CHC’s previous acquisitions, one of which left the North Sea market with just two helicopter operators.
Lothian and Falkirk funds explore merger
The circa £8.6bn Lothian Pension Fund and the circa £3.2bn Falkirk Council Pension Fund are exploring the possibility of a merger.
“The CMA should be aware that a forced disposal of the Fisher Business… could have severe consequences to the scheme and its members, and we ask that the CMA takes this potential outcome fully into account before reaching a final decision on the matter,” Gordon warned.
The scheme is closed to accrual. It had 399 deferred members and 764 pensioners as of July 1 2021.
It has a deficit of £72.5mn on a technical provisions basis and £110.3mn on a solvency basis.
The CMA and TPR have both declined to comment.
