Babcock in talks to sell offshore helicopter business to US group

Babcock International is in talks to sell its oil and gas aviation division which provides helicopter transport for offshore workers, as new chief executive David Lockwood moves to reshape Britain’s second-largest defence contractor.

The FTSE 250 company said it had conditionally agreed to sell the business, which has annual revenues of about £150m, to US-based CHC Group, the helicopter services company, for an undisclosed sum.

Headquartered in Aberdeen, the business employs 500 people and operates a fleet of about 30 helicopters that ferry workers in the UK, Denmark and Australia.

The disposal of the division, which been hit hard by the prolonged downturn in the energy industry, comes amid a strategic review of the group launched by Lockwood last year. 

Babcock acquired the oil and gas operations in 2014 as part of its purchase of aviation company Avincis, a deal that was seen as a way for the group to lessen its dependence on work from the Ministry of Defence.

Babcock paid £920m and took on £705m of Avincis’s debt for the business, which also provided emergency services such as air ambulances and rescue helicopters along with police contracts. It subsequently booked a £537.8m writedown on the operation. 

The sale, which is subject to pre-closing conditions, is expected to complete in the second calendar quarter of 2021. 

Lockwood is due to update investors on the results of his review in May, alongside Babcock’s full-year results.

The company, which provides maintenance and support for the UK’s nuclear submarines at Faslane in Scotland, has been battling to shore up confidence in its performance over the past two years.

It unnerved investors in January when it signalled it could be forced to cut the expected value of contracts and future income.