IMPERIAL AIRWAYS, LIMITED. (Hansard, 17 May 1939)

§ 33. Mr. Pethick-Lawrence
asked the Secretary of State for Air whether his attention has been drawn to the fact that shares in Imperial Airways, Limited, were quoted at 22s. 3d. on 31st March, 1938, at 25s. 3d. in November last, and at 29s. last week before his announcement; and what is the basis on which he has decided to buy them out at 32s. 9d. per share?

§ 36. Mr. Parker
asked the Secretary of State for Air whether he is aware that the market price of ordinary Imperial Airways shares stood at 25s. 3d. on the evening before the merger was announced on nth November, 1938, and at 29s. on 12th May, 1939, when the decision was made that they were to be bought for 32s. 9d.; what was the reason for offering so high a price; and what is the general policy of the Government in purchasing shares of companies which have been increased in value by subsidies given in recent years?

§ Sir K. Wood
The price was settled by negotiations between representatives of the company and of the Air Ministry and Treasury, the object being to arrive at a price which should be fair both to the new Corporation and to the shareholders. It is not possible to give in answer to a question all the factors which had to be examined, but, broadly speaking, the procedure was as follows:
The valuation made by independent accountants on behalf of the Government after consultation with the firm's accountants showed that the value of the net tangible assets of the company and its 100 per cent. subsidiary companies as at March, 1938, was not less than £2,484,000. Over and above these tangible assets the company had a claim for an additional payment in respect of development expenditure and of plant, premises and equipment, which had been written down to a nominal value, but are still in use and have substantial value, and generally the value of the organisation built up by the company in this country and overseas. After discussion, an addition of about £175,000 to cover these items was agreed, making a total figure of £2,659,086. On this method of arriving at the price the market quotations of the shares, which have fluctuated widely in recent years, were not material.
As regards the third part of the question asked by the hon. Member for Romford (Mr. Parker), a fair and reasonable offer would be made in relation to the circumstances of the particular one.

§ Mr. Pethick-Lawrence
Does not the right hon. Gentleman think that, in the first place, the fact that this company has received a subsidy for a number of years ought to have been taken into account in computing the purchase price, in terms of the assets; in the second place, 1389 does he not think that if the thing had worked out in the other way and the share value had been far higher than the computation of the assets, the company would have been unwilling to part with its assets at a figure below the market value of the shares?

§ Sir K. Wood
As to the second point, obviously I cannot answer a question about what the company would have done. As to the subsidies, they were, as the right hon. Gentleman knows, paid to the company in respect of specific services rendered by the company as the instrument of His Majesty's Government. The right hon. Gentleman referred to the price of the shares and rather suggested that it was the criterion in arriving at the price. I dare say he knows the fluctuations of that price. I am informed that last year the highest price was 62s. 6d. and the lowest 24s.

§ Mr. Lyons
Can my right hon. Friend tell the House with whom the conversations took place outside the Government before this price was fixed?

§ Sir K. Wood
I am afraid I do not quite understand my hon. and learned Friend's question.

§ Mr. Lyons
I merely wanted to ask whether any conversations took place with financial interests, and, if so, who they were, before this figure was fixed.

§ Sir K. Wood
The only people we consulted were the Government's own advisers and the firm of accountants whom they employed.

§ Mr. Lyons
Who were the advisers in this case?

§ Mr. Gallacher
Is this conscription of wealth?

§ Mr. Garro Jones
Has the right hon. Gentleman seen the criticisms which the City has poured upon this transaction; and is the transaction a reflection of the statement made at a dinner of aircraft manufacturers that restrictions on public expenditure were now considerably less than they had been until recently?

§ Sir K. Wood
I have no knowledge about the dinner, but, as regards public opinion on this matter, I should say that it has received in the Press, with one or two exceptions, general approval.

§ Mr. Parker
Is not the right hon. Gentleman aware of the very strong feeling that, when the value of shares has been built up by subsidies, that value ought not to be paid for by the taxpayer a second time over?

§ Sir K. Wood
I have given an account of the way in which the figure was arrived at, and have also pointed out that the subsidies were paid in respect of specific services rendered by the company. I would remind the hon. Gentleman that you cannot take as the value for such a purpose what happens to be the price of a particular number of shares which are on the market at a particular time.