Tootal Group (Hansard, 1 May 1991)

§ 5. Mr. John Evans
To ask the Secretary of State for Trade and Industry if he will refer the proposed takeover of the Tootal Group by Coats Viyella to the Monopolies and Mergers Commission.

§ The Minister for Corporate Affairs (Mr. John Redwood):
On the advice of the Director General of Fair Trading, my right hon. Friend the Secretary of State has decided not to refer the merger. The House will recall that when a previous proposal was made for a merger between these two companies there was a full inquiry by the Monopolies and Mergers Commission.

§ Mr. Evans
Is the Minister aware that that reply will be received with considerable dismay by all Tootal employees, especially those at the Slimmashirt factory in St. Helens? What on earth is the point of his going up and down the country making speeches that cast doubt on the wisdom of hostile takeovers when, in practice, he is not prepared to do anything about them? Bearing in mind the recent Polly Peck fiasco, does he agree that the Monopolies and Mergers Commission could have investigated the amount and integrity of Coats' profits which emanate from South American sources about which shareholders clearly know very little?

§ Mr. Redwood
In its previous inquiry, the MMC considered all the relevant issues, many of which are the same as under the current proposal, which led to the director general's advice. The speeches that I have made about the virtues and wisdom, or otherwise, of contested takeover bids were aimed at shareholders. In this case, no matters of public interest need investigation. There are many matters for shareholders which can properly be dealt with by them. I am sure that the shareholders of both companies will read the record of these exchanges and other matters, including an early-day motion, and that they will be aware of the House's view when they make the important decision about the future of the two companies.

§ Mr. Nicholas Winterton
Those of us who take a great interest in the textile and clothing industry will have the greatest regard for Coats Viyella, for its role in the industry and for the reputation of Sir David Alliance in seeking to maintain a meaningful and proper place for the textile and clothing industry in the United Kingdom economy. But is not my hon. Friend concerned that a 303 monopoly will be created? How many other thread manufacturers will remain in the United Kingdom should the merger go ahead? What impact will the merger have on employment, which is critically important to the north-west of England?

§ Mr. Redwood
I am grateful for my hon. Friend's comments in the first part of his question. The question of sewing thread was addressed fully in the previous report. The advice of the MMC was adopted and the correct action was taken to deal with that potential competition detriment.
The issue of employment was also tackled in the previous report. If I remember rightly, the report said that both companies then thought that there would be some job losses through natural wastage resulting from the rationalisation, but that subsequently there would be more opportunities for new jobs. In the new bid, the two sides take a different view on jobs. The director general does not believe that there is a major matter for investigation in the public interest, but of course the jobs issue should be debated by the shareholders. I presume that the shareholders will want a successful enterprise and that will include winning business, which creates jobs. The only guarantee of a job is to have business which people want to take up and customers to buy the goods.

§ Mr. Henderson
Before a decision is taken on the matter, will the Minister accept that the textile industry has been particularly badly hit by the recession? Is not he concerned about the fact that hundreds of jobs have been lost, on a weekly basis, in communities that depend heavily on the textile industry such as Colne Valley, Batley and Spen and Keighley in Yorkshire and Pendle and Bolton in Lancashire? Does the Minister believe that those job losses have been caused by high wage settlements or, on reflection, does he believe that interest rates may have had a bigger impact?

§ Mr. Redwood
The decision to which the question refers has already been taken. My right hon. Friend has announced his decision. Like the hon. Gentleman, I regret job losses wherever they occur. I should need to look at each individual case to decide what lay behind those particular job losses. However, a successful textile industry depends on the right goods servicing customers. I must point out the recent examples of inward investment in the textile industry; as with the motor industry, people see that Britain is a good place in which to invest and a good place from which to export.

§ Mr. Brandon-Bravo
While not taking any side in the bid between Tootal and Coats Viyella, my hon. Friend will be aware that the financial strength of the bidder can be bolstered by the use of pension fund surpluses. Many of my colleagues and I are most concerned about that. Surely the primacy in pension fund surpluses must belong to pensioners past, present and future. Will my hon. Friend consider that practice?

§ Mr. Redwood
The question of gearing was considered by the director general when he reached his decision to advise against a reference. The specific question about pension fund liabilities is governed by other regulations and laws. Regulations prevent the inappropriate use of surpluses and there are rules to ensure that the interests of 304 pensioners are looked after. After all, that is the whole point of a trust fund. It must ensure that moneys are available to meet future pension liabilities.