HC Deb 25 July 1985 vol 83 cc1391-9

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Archie Hamilton.]

9 pm

Mr. Bill Walker (Tayside, North)

I thank you, Mr. Speaker, for giving me the opportunity to debate the attempted takeover of Arthur Bell and Sons, a Scotch whisky company in Perth, by Guinness. I wish to make it clear from the outset that my concern in this matter is that of a constituency Member of Parliament and also the public interest. As I had to tell the BBC earlier today, in this matter I am no one's lackey. Neither I nor any members of my family have shares in Arthur Bell and Sons or in Guinness. During this short debate, I am afraid that I shall have some harsh comments to make about the self-regulating body of the City—the Panel on Take-overs and Mergers. I shall also make some comments about the role of the Bank of England in this matter.

Let me make it clear to the House that I support the stock market and that I am a passionate believer in the private sector and in the capitalist system. What I say this evening should not be taken as a reflection of my belief in this area. There are advantages in a self-regulatory mechanism, but I firmly believe that such a mechanism must be seen to be fair, and that justice must be seen to be done when the panel operates.

In the case of the attempted takeover of Arthur Bell and Sons by Guinness, I hope that I shall demonstrate clearly to the House that justice was not done, and was certainly not seen to be done. I shall also demonstrate that what one of my more flamboyant hon. Friends called, "Skulduggery in the smoke-filled rooms of the City," has taken place.

I regret very much the fact that my hon. Friend the Under-Secretary of State for Trade and Industry and my right hon. Friend the Secretary of State did not wait to hear the evidence that I shall present this evening before deciding on the matter. All aspects of this attempted takeover should have been more fully investigated, as I requested, by the Monopolies and Mergers Commission. During the past few weeks, I and several other Scottish Members from all political parties have made repeated requests for a referral to the Monopolies and Mergers Commission. My hon. Friend must realise that the fact that that did not happen will not be forgotten in Scotland.

My hon. Friend the Minister will be aware that, recently, there has been a dark cloud hanging over the activities of many stock and insurance markets. Following the disclosure of murky and dishonest activities by individuals and by groups of individuals in the system, Lloyd's was forced to introduce new rules and to insist on a new code of conduct. My right hon. Friend the Chancellor of the Exchequer has little reason to be pleased with the way in which the Bank of England behaved during the costly farce of Johnson Matthey Bankers, yet the Bank of England is supposed to be the guardian of the standards and morals of the City. The former deputy governor of the bank is the chairman of the Panel on Take-overs and Mergers.

The Financial Times of Friday 19 July, referring to a decision taken by the panel, said: The conclusion, it seems, is that Mr. David Stevens—the chairman of the two companies—was not in concert with himself but agrees that he should be regarded as if he were. This is nonsense. Given the widespread concern about the Panel's future ability to police a City impregnated with conflicts of interest, it is also worrying nonsense. Having once been found out in a massive cover-up, any reasonable person must wonder whether it is just possible that the bank will again be party to another cover-up; party to an attempt to whitewash unacceptable acts in the stock market by firms and individuals which operate within the system.

Unless the Chinese walls of the City are seen to work, and unless they are believed to be an effective safeguard against inside vital knowledge being made available to unfriendly sources, the morals and credibility of the City must be at risk. If the Chinese walls can be or have been breached, this would not be good for the wellbeing of the capitalist system, the private sector or the stock market. I care very deeply about this, which is why I requested a meeting with my right hon. Friend and asked for the debate.

I shall present my evidence this evening in three parts. They are, first, the activities of the bankers Morgan Grenfell and Company Ltd. and the panel on Take-overs and Mergers; secondly, the misrepresentation of the facts by Guinness; and, thirdly, the importance of the independence of Arthur Bell and the importance of the whisky industry and the Scottish financial institutions to Scotland.

No one disputes that on 3 February 1983 the chairman of Arthur Bell wrote to Morgan Grenfell and suggested: best interests would be served by a gradual winding down of our business connections. What is in dispute are the events that followed. Morgan Grenfell claimed that the winding down was exactly what happened. The Panel on Take-overs and Mergers believed it. I do not, and I believe that I can show that the events which followed that letter demonstrate that Morgan Grenfell made determined efforts to retain its business connection with Bell and, what is more important, that it retained its business connection.

I have a letter dated 15 February 1983 written by Mr. Christopher Reeves to Mr. Miguel, the chairman of Arthur Bell and Sons: We have had a very long relationship with your company and with yourself and I believe that David Ewart and Christopher Knight, the new Assistant Director whom I have allocated to you, will provide the sort of service that your are seeking. The letter continues: I do however hope that it will be possible for us to get together later on this year to review the progress that is being made on a series of most important moves for the development of your company. The letter contains other matters, but those are the important phrases. That was dated 15 February, which is after the so-called severance of the two concerns.

I believe that I can show more than that. Morgan Grenfell actually improved the way in which it serviced Bell, and it did so, as the letter clearly shows, by the setting up of a new team to service Bell's. On 8 February 1983 Mr. Christopher Reeves, the chairman of Morgan Grenfell, wrote to Mr. Miguel concerning a meeting at 1.30 pm in the Connaught hotel. On 18 February Mr. David Ewart, director of Morgan Grenfell, wrote to confirm the visit by himself and Christopher Knight to East Mains, Dunfermline, Perth, and Pitlochry. This was to acquaint the new team with more of the details of the company. Mr. David Ewart wrote to Mr. Miguel on 10 May 1983, talking about companies that might be suitable for takeover.

On 23 March 1983 there was a meeting in the London Hilton, attended by Mr. Miguel of Bell's, Mr. Cooper of Bell's and Mr. Reeves, Mr. Ewart, Mr. Kennedy and Mr. Knight of Morgan Grenfell. At that meeting Morgan Grenfell was asked to prepare a list of prospective acquisitions. On 22 July 1983 Mr. Cooper of Bell's wrote to Mr. Ewart: As you know we aim to provide a comprehensive range of financial advisory services to our clients, but the extent to which those services are called upon varies considerably from client to client. That letter discusses the charges that Bell's would have to pay. It continues: It is our wish to provide Bell's with the best possible advice and best possible services. On 7 July 1983, writing to Mr. Cooper, Morgan Grenfell said that there was a large public company, with a turnover of £.1.5 billion, which was in trouble and in which Bell's might be interested. The letter also mentioned another company in the food industry. It is an interesting letter.

On 3 February 1984 Mr. Ewart wrote to Mr. Miguel: As you probably know I was at the Panel today with Patrick and was simply delighted at the final ruling. I enclose a copy of the Financial Times referring to … I rang Geoffrey Cooper and mentioned it to him this morning. That is another company being suggested to Bell's.

On 20 April 1984 copies of reports and accounts were sent from Mr. Ewart to Mr. Miguel. On 28 March 1984 Mr. Colville wrote to Mr. Cooper suggesting an involvement in a sector in the United States. On 15 March 1984 Mr. Miguel wrote to Mr. Ewart thanking Morgan Grenfell for its assistance in bringing Gleneagles Hotels plc into the Bell's group.

On 9 April 1984 Mr. Ewart wrote to Mr. Miguel referring to "grand slam", that being the code name for a well-known company in the United Kingdom. On 25 May Mr. Miguel wrote to the chairman of Morgan Grenfell about "grand slam" saying: I am looking forward to you and your team joining us here next Friday. A copy of the letter was sent to Mr. Ewart.

On 9 May the secretary to Mr. Ewart wrote to the secretary of Arthur Bell's outlining details of the timetable for the meeting on Tuesday 22 May. Mr. Ewart was to join Mr. Miguel at the Sheraton Park hotel, Knightsbridge, for breakfast. They were then to take a taxi to Victoria, to catch the 10.30 am train to arrive at their destination at 11 am. On arrival they were to be met by a chauffeured car, the property of the chairman of "grand slam"—a well known company in the transport and hotel industries.

On 22 June 1984 Mr. Ewart wrote to Mr. Miguel with information about a company code named MATCH. He said: We will need to discuss our next step, clearly … is a man who has to be handled with some care and we have to consider whether it is best for you to make a direct approach to him or whether we should get in touch with Hill Samuel, the company's advisors. On 5 October 1984 Mr. Colville wrote to Mr. Cooper at Bell's: As requested by you we have carried out"— and this is important— an update of our information on the above company. (Enclosed reports and information.) Please do not hesitate to contact me if there is any further information you require. On 14 December 1984—close to the date when we first heard about the proposed takeover—Mr. Ewart wrote to Mr. Cooper a detailed letter, of which I have been fortunate enough to obtain a copy. The letter refers to the group structure of Bell's. Morgan Grenfell is advising Bell's on its group corporate structure and financial planning. The letter concerns the transfer or trading activities to a holding company and states: From a taxation point of view such a change would be quite straightforward with capital gains tax losses remaining with the holding company whereas trading losses would normally accompany the trade and undertaking to the new subsidiary. The letter discusses the forming of a new company, the effect on Bell's debenture and loan stock, the cost of that, the public relations aspect, the timing and so on. That letter was dated 14 December, which shows that Morgan Grenfell was immersed in Bell's structure, its corporate planning and its future at that date. To suggest some months later that somehow it was not involved is nonsense, and I shall show why.

Mr. Christopher Reeves writes to Mr. Miguel on 14 November 1984 thanking him for his good wishes on his new appointment, and continuing: These are certainly interesting times in the City and I look forward to the challenges ahead. I too am sorry that we will not be able to meet in Edinburgh in December, but no doubt there will be another opportunity for us to get together, either in Scotland or in London. On 20 December 1984 Mr. A. J. Corville of Morgan Grenfell wrote to Mr. Cooper at Bell's:

Accounts of"— a liquor company— Please let me know if I can be of any further assistance in relation to this Company. Here is another proposed takeover. The minutes of Bell's board meetings throughout 1983 and 1984 discloses details of discussions and agreements on sensitive matters involving Bell's and Morgan Grenfell, plus details of accounts rendered when there was supposed no longer to be any connection with Bell's. They were accounts rendered and paid for. In March 1985, only days before the beginning of the events, I saw a letter inviting Mr. Miguel to attend with Morgan Grenfell a seminar on investment opportunities in Australia.

I believe that all this evidence—there is much more; I took what was only a sample—clearly demonstrates that Morgan Grenfell was working as Bell's merchant bankers right up to the time when the Guinness takeover was launched.

It is interesting to note that Mr. Miguel was asked to lunch on 21 November 1984 with Mr. Ian Watson, city editor of the Sunday Telegraph. Mr. Watson mentioned that a company was interested in acquiring information on Bell's. What is more, the bankers acting for that company were Bell's own bankers.

Mr. Miguel did not believe the story, yet it was confirmed later at the lunch by a colleague of Mr. Watson. On returning to Scotland, Mr. Miguel telephoned Mr. Christopher Reeves of Morgan Grenfell. He as unavailable, being in Europe. Mr. Miguel then spoke to Mr. David Ewart, who said that he would be surprised if this was the case—and if it was, it was nothing to do with him. Mr. Miguel was not satisfied and asked for Mr. Reeves to contact him to confirm that the information he had received was not correct. Mr. Reeves did not contact Mr. Miguel further.

All this information, and more, was available to the panel. I believe that it represents a clear case which shows that Morgan Grenfell was working both for Bell's and Guinness at the same time. I cannot believe that the managing director of Morgan Grenfell, Mr Christopher Reeves, Mr. David Ewart, and the director Richmond Watson, in charge of the Guinness takeover attempt, exchange only pleasantries when they meet.

I suggest that there is a prima facie case of the Chinese walls of the city having been breached. Is it any wonder that I must ask whether the panel decision was a whitewash, particularly when one realises that there is no recognised appeal procedure against panel decisions? That is why I wanted to consult the Minister before the decision was taken to go to the commission.

I draw the Minister's attention to reports that have appeared in the press in recent days to the effect that the Kuwait Investment Office bought 3.8 per cent. of Bell's stock on 17 June 1985, three days after the bid was announced. It bought at an average price of 270p, at a total cost of 13.5 million. It has also been reported, and not denied, that it has accepted, on its own behalf, 225p for all of the 3.8 per cent. share.

I remind the Minister that in January 1984 the Kuwait Investment Office was the under-bidder in the purchase of Gleneagles Hotels plc. Why, then, is it buying shares in Bell's at 270p and, a few days later, selling them for 225p, thus creating for itself a substantial loss? What is the pay off? Surely that is a reasonable question. Could it be that it will be given the chance to buy Gleneagles Hotels if Guinness is successful in its bid for Bell's? If so, this smacks of people acting in concert. Is this another example of "skulduggery in the smoke-filled rooms of the City"?

I am reminded that Mr. Peter Stevenson, a director of Moble Grossart, who is well known to my hon. Friend the Under-Secretary of State on the Front Bench, is, with some of his friends, a defender of an independent Scottish economy. It is Mr. Peter Stevenson who has attacked me in the press. I remind the House that he was a director of Gleneagles Hotels before the company was taken over by Bell's. Is that just another coincidence? Whatever it is, I find it fascinating that Arab money is used to purchase shares in a liquor company when the mere possession of liquor in Arab countries leads to flogging and/or imprisonment.

In the words of the right hon. Member for Glasgow, Govan (Mr. Milian), the Guinness publicity machine has been issuing statements that are unpersuasive and positively misleading. Why does Guinness want Bell's? The answer is that it needs Bell's to pay its United Kingdom dividend. If Mr. Saunders, who seems never to spend more than four years with any company, does not increase his dividend, he will be seen to be a facade. He does not wait for the truth about his pruning and surgery to emerge. He moves on before the truth emerges.

For example, pledges of no redundancies from Mr. Saunders are worthless. A few days before Christmas 1984, Guinness told its workers in Liverpool that they were managed by people who lived in the area and that they had strong local ties and roots. However, in May 1985, well over 200 long-service, loyal employees were made redundant. In 1984 Guinness took over Martin, the newsagents. The staff were given assurances that there would be no redundancies. Despite the assurances, many long-serving, loyal staff were made redundant.

Guinness has problems and Bell's does not. Guinness cannot get its overseas profits into this country to pay its United Kingdom dividend. I understand that profits from Nigeria can take up to two years to get into the United Kingdom. Guinness is writing off advance corporation tax and it does not have enough United Kingdom earnings to pay its dividend. Guinness is in trouble and Bell's is not.

Bell's is a different sort of company from Guinness. I would describe Bell's as an ideal company. It is an identikit company of the Tory party. It is the sort of company that the Tory party dreams about. It increases sales every year but never cuts its prices to do so. It increases its profits every year and it has no redundancies. When it builds new plants and factories many miles away from existing sites, it busses its employees. Indeed, it has been doing so for over 20 years. Bussing is not a recent phenomenon in the Bell's organisation. It is the sort of company that every Member dreams about having in his constituency. I am sure that right hon. and hon. Members will tell me how fortunate I am.

The Bell's staff receive the same allocations for shares and get the same shares as directors when shares are allotted. Everyone in Bell's is treated alike and everyone works hard. The Scottish institutions, God bless them, have recognised this. They have remained with Bell's and I am thankful to them for that. They recognise that if Scotland has no home-based, profitable firms, the very reason for the existence of the Scottish financial centre will vanish. If we lose Bell's, which company will be next? Will it be The Famous Grouse, which is also in my constituency? Perhaps Mr. Saunders will have his eye on Distillers which, again, is in my constituency. I have an interest in the welfare of the Scottish whisky industry.

I can provide my hon. Friend the Under-Secretary of State with all the evidence that I have used this evening and much more besides. Perhaps it is not too late to prevent the destruction of the good name of the City, about which I care deeply. More importantly from a Scottish point of view, I hope that we can protect and safeguard the Scottish-based whisky industry, which has done so well for Scotland for so many years. It has been kind to the Exchequer for many years and it has helped the balance of payments for many years, which it will continue to do if it is managed effectively and efficiently by those who care.

9.24 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher)

I am grateful to my hon. Friend the Member for Tayside, North (Mr. Walker) for the opportunity to respond to certain views which he has expressed about the conduct of the Arthur Guinness bid for Arthur Bell, and takeover bids generally. He properly disclosed his interests in both companies by saying that he had no financial interests in either company. I can add to that by saying that I know for certain that he is not even a customer of Bell's or Guinness.

First, the merits of the bid and the way in which it is pursued are separate questions. My hon. Friend's view is that the bid has no merit, and that Bell's should remain independent. He is perfectly entitled to take that view, whether on the basis of a detailed evaluation of the Guinness offer or on broader constituency grounds. I wholeheartedly agree with him that Bell's is a highly respected company. It has a good commercial reputation for its performance over many years, and as a neighbour. It is a good company from a social point of view, not only in the city of Perth but in Scotland as a whole. It is probably improper for me to say that Bell's has also been a good friend to the House from time to time.

However, it is Bell's shareholders, rather than I, whom my hon. Friend needs to persuade that he is right. My right hon. Friend the Secretary of State had decided not to refer the proposal to the Monopolies and Mergers Commission, as he announded on 23 July. The decision is in accordance with the recommendation of the Director General of Fair Trading, and was taken after full consideration of all the relevant issues. I discussed the issues with both companies, my hon. Friend and other hon. Members. They in turn, took the opportunity to present their cases to the Director General before he made his recommendations to Ministers.

It is now for the shareholders of Bell's to make up their minds and to proceed accordingly. They may or may not reach the same conclusion as my hon. Friend. The point is that the decision rests with them, not with the Government. I have made it clear to my hon. Friend that the Government's interest in such matters is in competition and the public interest. All the other matters relating to the performance and management of a company or companies, such as which is the better exporter, are clearly for the shareholders to decide. The grounds on which they make the decision are their own affair.

The essential questions for any shareholder in a company for which a bid is made are whether the consideration offered is adequate, and whether the acquisition of control by the bidder would or would not enhance the value of his asset. Those questions are not for the House because this is not the place to consider those commercial aspects of the bid.

My hon. Friend argued against the bid on grounds of propriety. In particular, he argued that the relationship which existed between the merchant bank Morgan Grenfell and Bell's before the bid should preclude Morgan Grenfell form acting for Guinness. He contends that the takeover panel erred in allowing Morgan Grenfell to act for Guinness, and suggests that alternative arrangements for regulating takeovers should be considered.

My hon. Friend is right to stress the importance of propriety in these matters, because that concerns the Government, but who acts for whom in the conduct of a takeover bid raises quite different issues from the merits of the bid as a commercial consideration. In any event, the circumstances that my hon. Friend has cited do not, in my view, justify the conclusion that it is improper for Morgan Grenfell to act for Guinness, or that the panel's judgment was flawed.

My hon. Friend suggested that justice has not been done in the City, but it is now about 20 years since the panel was constituted and the first code promulgated. That is a short time in terms of some City institutions but a fairly long one in terms of the developments that have taken place in securities markets over the past two decades. During that time the panel has been faced with numerous "vital and important" decisions. I quote my hon. Friend, and his words are apt. Their verdicts have not all been accepted nem. con. It would be remarkable — and dubiously to the panel's credit—if they had. But the panel and the code have come to be accepted—indeed, they have been judicially recognised—as setting the standards which should obtain in this area.

The proposals set out in the Goverment's White Paper, "Financial Services in the United Kingdom", inevitably call into question whether the code and panel can continue to operate on the extra-statutory basis on which they have operated hitherto. The Government have not yet reached a conclusion, but we are no more minded than our predecessors have been to second-guess judgments taken by the panel on the basis of full consideration of all the material facts, particularly when neither of the parties directly affected has represented that the judgment was flawed.

Mr. Bill Walker

That is not true.

Mr. Fletcher

I have had no representations from Arthur Bell about the conduct of the panel. Bearing in mind my responsibilities and, more importantly, those of my right hon. Friend in these matters, I would expect a company that was under threat of takeover to make very strong representations. In my present post I am used to chairmen of companies and counsel coming to see me frequently to make representations in matters of this kind. I can only declare my surprise, in view of my hon. Friend's comments, that it has not happened in this case.

Mr. Bill Walker

My hon. Friend is not denying that I asked for a meeting. I only cancelled it subsequent to the decision on the referral. My hon. Friend will be aware that I asked for that meeting, and I gave details of who would probably be coming to it.

Mr. Fletcher

Yes, that is correct.

I say to my hon. Friend in the friendliest possible way that if Arthur Bell and Company and their advisers feel half as strongly about the matter as my hon. Friend suggests, that justice has not been done in the City, and that they have been deceived and treated badly, I can only express my surprise that they should cancel the meeting. The fact that a decision had been made not to refer the matter is one thing. The fact that they felt that the City institutions were behaving dishonourably towards them is quite another. If the company felt as strongly as my hon. Friend suggests, it should have made a complaint.

I am concerned that, in his very strong defence of Arthur Bell and Company this evening, my hon. Friend should have impugned Lloyd's and the Bank of England, and generally the good name of the City, particularly in the light of the fact that we have had no representations from Bell on these matters.

However, I am particularly sorry that my hon. Friend has repeated in the House that the Deputy Governor of the Bank of England is the chairman of the takeover panel, because he is not. They are two quite separate persons. The Deputy Governor of the Bank of England is Mr. C. W. McMahon and the chairman of the takeover panel is Sir Jasper Hollom. I have seen no evidence from my hon. Friend and he made no justification for his charges about the City. I repeat that I understand how strongly he feels. However, an hon. Member always has to be careful about abusing parliamentary privilege when making representations of this sort unless they can be properly substantiated.

Mr. Bill Walker

If I have in any way impugned the Bank of England incorrectly, I withdraw unreservedly and apologise. I shall investigate further.

Mr. Fletcher

I am sure that my hon. Friend's remark will be appreciated by those concerned.

It would not be right for me to go into matters of detail furnished to the takeover panel on the basis that they would be treated in confidence. I shall confine myself to a couple of essential facts. The first is that both Guinness and Bell's agreed of their own free will to accept the panel's verdict. There was nothing to stop Bell's from pressing objections at law to Morgan Grenfell advising Guinness. They were not obliged to let the panel decide. They chose to. I have had no representations from them that the panel should have reached a different view.

The second is that, while I do not doubt my hon. Friend's good faith, my inquiries throw a rather different light on this matter. If my hon. Friend took another look at Bell's files, he might observe that in the Gleneagles case that he mentioned Morgan Grenfell acted not for Bell's but for the other side.

Mr. Bill Walker

I knew that.

Mr. Fletcher

He might also entertain the possibility that the letters referred to in the panel's decision terminated Morgan Grenfell's position as Bell's merchant banker. In those circumstances he might think it natural enough that Morgan Grenfell should make some attempt to restore it, hence the contents of the letters that I listened to very carefully and my hon. Friend's reference to a new team to serve Bells.

However, the point is that Bell's and Morgan Grenfell decided to accept the panel's verdict on this matter, and this they have done. The future of Bell's is now, correctly in my view, in the hands of the company's shareholders.