HC Deb 06 November 1995 vol 265 cc706-12

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

10.11 pm
Mr. D. N. Campbell-Savours (Workington)

This is a story of deception, intrigue, exploitation and injustice. It is the story of how a large multinational company, with profits of $698 million last year, more than $7 billion in net sales world wide and an international reputation—a company responsible for marketing a branded product, known throughout the world for its quality—targeted for closure a small, technologically advanced, highly profitable food company in north-west England. In so doing, it totally undermined the morale of a town.

The multinational company concerned is Campbell Soups of America, one of the largest food producers in the world. The plant in north-west England is Homepride Cook-in Sauces in Maryport, a town reeling from the effects of escalating unemployment, which, in parts, reaches nearly 25 per cent.

Having purchased Homepride's operations in Maryport under the procedure of a mock auction, that multinational company in pursuit of profits gave those in the work force assurances as to their employment, fooled the vendor as to the plant's future and effectively stole the brand name. Within eight weeks, it announced the sacking of the work force with a spurious offer of transfer to other plants. That created mayhem, distress, anger and a deep sense of seething injustice and resentment among the local community.

In 16 years of being the Member of Parliament for Workington, I have witnessed and experienced many closures. I have seen the rundown of the footwear industry, with the closure of Bata and other footwear companies. I have witnessed the rundown of parts of British Steel Corporation's Workington operations, the closure of the Leyland-Volvo bus plant, and many other closures. But this closure has been the worst of the lot because it can be justified neither morally nor commercially and because a poor but proud and loyal community is being punished for having made a success of a company that threatened the market share of a predator multinational.

I want to say a few words about the background to the sale. Dalgety, the former owner of the cook-in sauce business, having recently acquired Quaker European pet foods operations for £422 million, found that it needed to raise a substantial amount of money. To raise those funds, it decided to sell off a number of its more profitable processed food operations.

Earlier in March, Dalgety had said that it was looking for bids for various food operation divisions. In the case of Homepride in Maryport, a number of organisations were either invited by Dalgety or approached by it with a view to purchasing those Homepride operations.

A de facto auction was announced and over a period of months a number of organisations became involved in the bidding arrangements. They included, first, BSN Danone—I understand that that company is registered in France; secondly, the CPC organisation; thirdly a venture capital arm of the National Westminster bank; fourthly, Schroder—its interest appears in part to have centred on its role as adviser for CPC; fifthly, a separate arm of Schroder specialising in venture capital projects; and, sixthly, Legal and General Insurance. Those are but some of the organisations that expressed an interest in acquiring the Homepride Maryport operations.

A number of bids came from organisations that were putting together packages that involved a combination of privately held equity, institutional equity and offshore funding. Even organisations such as Investors in Industry—3i—were partially involved. Some bids relied on the services of a management buy-out team, which in certain circumstances would have held direct equity, and perhaps even share options.

One of the problems was that it was recognised that a trade buyer would always be more risky than acquisition by a consortium sponsored by a financial institution, but no one could say anything. No one was allowed to warn the work force of the dangers. Why? Because the whole sale was shrouded in confidentiality. The Homepride sales prospectus, a veritable limited edition publication, was kept under lock and key. Any individual or institution in any way involved in the sale or purchase of Homepride was bound by what can only be described as an oath of confidentiality. In other words, "Keep your big mouths shut, because if you don't, we'll sue." That meant that no one could identify the motives of the individual players.

What I can now reveal is that, apart from one, all the people who were bidding wanted to keep the plant open. They all realised that it was a highly profitable company; indeed, it was the jewel in the crown of Dalgety's profitability. They recognised Maryport Homepride, with its ever-increasing production and profit potential, as a cash cow. There was, however, one company bidding that did not want to keep the plant open—Campbell Soups. It knew that it had to close the plant down because it threatened its strategy for the United Kingdom.

Campbell Soups was so determined to close the plant down that it outbid all the other bidders and signed a deal on 4 August. What did it buy? It bought a business with a book asset value of £9 million and a profit of £4 million on a turnover of £28 million—all for the princely sum of £58.6 million. The size of that figure suggests the desperate nature of its desire to acquire the business, grab the brand name and close down Maryport operations.

Sadly, in the final hours of the negotiations, Dalgety failed to recognise the dangers, with the effect that it failed to secure an undertaking guaranteeing the retention of the work force on the Maryport site, as had happened in the Reckitt and Colman sale of its sauces business in a back-to-back deal with Bass and Unilever.

Campbell Soups, of course, did not want such a deal, so why did it want to close the operation down? First, it wanted to acquire the substantial brand name of Homepride. Its overriding, overarching obsession with brand names is clearly demonstrated in the 1995 annual report of the United States parent operation. Secondly, it wanted to acquire a turnover injection of nearly £30 million in Campbell's United Kingdom operations. It desperately needed that because of its failure to turn in good figures on its existing operations, which some in America were questioning.

Finally, Campbell's desperately needed to secure the removal of capacity from the Maryport site, which could potentially damage its commercial objectives in the cook-in sauce market. We have to understand that the Maryport operation, in spite of a high profit against asset/turnover ratio, still left immense scope for further production and profit taking.

At the time of the takeover of 4 August, in a series of carefully prepared news releases and statements, Campbell's, hiding behind ambiguity, set out to convince the West Cumbrian public, the Maryport work force and, to some extent, even City institutions that the acquisition was good news for Maryport. Certainly the work force was misled because, at a meeting between Mr. Al Simpson and Mr. Daryl Brewster and the work force held on site at the beginning of August, they even had the gall to suggest that they were considering bringing new products to Maryport. I quote them: We are thinking of bringing pasta sauces to Maryport". I further quote from a letter of 4 August 1995 from Mr. J.W.T. Mustoe: We are proud to be the new owners of Homepride sauces. There is no doubt that it is a fine brand, and, as many of you will know, Homepride Sauces was at the forefront of developing the cook-in sauce market. It fits in very well with our portfolio of brands which included Campbell's Soups, Fray Bentos, Rowat Pickles and Campbell's/Food service Businesses. You may be unaware that Campbell's is the biggest sauce manufacturer in the world and it is fitting that the UK's largest cook-in sauce brand"— Homepride— has joined us. We believe that we can build on the strength of the Homepride Sauces name as well as develop and grow business in the cook-in sauce market. To avoid those in the work force being alerted to the impending disaster confronting them, Campbell's even went through the spurious exercise of conning local management, who in the main appeared to have been in blissful ignorance of what was happening, into organising, in August, Investors in People status for the Maryport plant. The document produced by the company and given to the work force in August stated: We"— the company— firmly believe that implementing the Investors In People Programme as part of our overall strategy will allow our Company to continually develop, expand and build on the success of introducing new product ranges and processes into our operations here at Maryport … The Programme will cover everyone within the Company and we firmly believe that it will be a major benefit to our organisation and to everyone working within the Company and further demonstrate our commitment to the development of people within Maryport, however, we recognise that our success with the Investors in People will only be achieved with everyone working together. Furthermore, having put local management through that hoop of deception, Campbell's then had Mr. Mustoe, United Kingdom group managing director, tell me that local management supported the closure as it thought that there was no alternative. Closure of that highly profitable plant—what a betrayal of the truth and of his own newly acquired employees.

It was all a deception, which has now persisted for more than 14 weeks, and we are only at the beginning of a struggle.

As recently as last week, I learned of a decision that had been taken in early August to put a new production line into another Campbell's plant for the production and handling of Homepride cook-in sauces. Last week, the company announced that 50 workers were seriously considering moving to Campbell's other plants. Another "porky"—the real figure is nearer 10 and may be as low as six.

Perhaps the company's wriggling and shifty footwork of last week is an even clearer sign of its intentions. Last week, I asked the Campbell's UK group managing director whether he would arrange for me to address the board of Campbell's at its New Jersey headquarters in the United States of America. I offered to cross the Atlantic. I also asked to be given the option to attend the annual general meeting, which is due on 16 November, and Campbell's could have allowed me to enter as a guest. I understand that that is the position under American law.

A public relations company started ringing up both myself and the media offering irrelevant responses in an attempt to evade the central questions that I have been asking. My questions still remain unanswered and I shall be tackling those issues when I visit King's Lynn next week, to appeal to the workers of the King's Lynn Campbell plant to black production lines transferred from Maryport in my constituency.

This is a saga of deceit and dishonour. The conduct of the company's UK operations is totally at variance with the standards of corporate governance set out in the memorandum of 6 October 1995 provided to shareholders who were invited to attend this year's annual general meeting in Camden, New Jersey in 10 days' time. Paragraph 18 of that document—which has only just been published in America and was sent over from America to me last week by sympathetic people—states: The company does not have a poison pill"— the Campbell company is talking about itself— or other anti takeover devices because it believes that the way to remain independent is via superior performance in building shareholder wealth". The people of Maryport did just that: they built the shareholder wealth of Dalgety through its Homepride operations. They, too, did not have a poison pill because they believed that they were the jewel in the Dalgety crown.

I am sure that well-respected and internationally regarded old-money members of the Dorrance family on the board of Campbell's American operations will understand what I mean when I suggest that new-money business decisions taken in little old England appear to lack principle. If the Dorrance family still remain unconvinced, I would ask them to look at the memorandum that I have just mentioned. Under the heading, Requirements of Managers and Directors it refers to Strong, principled and ethical leadership". The family have been let down by people on this side of the Atlantic who should have known better. I beg them to intervene out of a sense of Christian conscience. What is happening is wrong; it is immoral; it is unprincipled and must be stopped.

10.27 pm
The Minister for Competition and Consumer Affairs (Mr. Jonathan Evans)

I appreciate the force of the concerns expressed by the hon. Member for Workington (Mr. Campbell-Savours), who has sought to raise the issue in the House on a number of occasions. I have been present when he has made points of order and asked questions of myself and ministerial colleagues. I congratulate him on his success in bringing the subject to the Floor of the House tonight. By the emotion that he brought to his remarks, he demonstrated his strength of feeling over the issue.

It must be recognised that industry generally operates in a competitive environment, and the Campbell company has existed in the United Kingdom since 1959. It currently employs more than 2,000 people—I think the figure is 2,100—in five locations in the United Kingdom. It has plants in King's Lynn, in the constituency of my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham), who is watching tonight's debate, and in the constituency of my former hon. Friend, now the hon. Member for Stratford-on-Avon (Mr. Howarth). It has three other plants in Glasgow, Salford and Peterlee, but they are not so central to the change in operations mentioned by the hon. Member for Workington. In my remarks I hope to outline the way in which the Office of Fair Trading has previously considered the issue.

Campbell's has invested quite heavily in the United Kingdom food industry in the past 12 months. The hon. Gentleman referred to its £56 million purchase of the Homepride sauces plant and, collectively, I believe that its expenditure has been about £100 million. In the context of tonight's debate—the impact of Campbell's decision on Maryport in the hon. Gentleman's constituency—I recognise that announcements such as that to which the hon. Gentleman referred can be a body blow in areas of high unemployment. That fact was reflected in the force of the hon. Gentleman's remarks.

For what it is worth, Campbell's has sought to safeguard the 123 jobs at its plant by offering employment at its two sites at Stratford-on-Avon and King's Lynn. I recognise, however, that the practicalities of accepting such offers are bound to be limited. The hon. Gentleman said that the company announced last week that some 50 people might take advantage of the offer. Irrespective of whether 10 or 50 people do so, they must deal with the practical difficulty of moving from the hon. Gentleman's constituency to the two alternative locations.

I recognise that the closure is a deep disappointment in Maryport. In dealing with such matters, the Government endeavour to do their best to assist in developing new job opportunities within the constituency affected. I shall detail those endeavours later in my speech.

Mr. Campbell-Savours

Will the Minister give me a straight answer to a very simple question? Does he believe that it is right in principle that a company such as Campbell Soups of America can move into a constituency such as mine and close down an extremely profitable operation with huge potential? I have seen the Dalgety production forecasts well into the next century. Does he believe that it is right in principle that a foreign conglomerate with a huge international reputation should have the market power to move in and destroy jobs in an area of high unemployment? Will the Minister give me a straight answer to that question, because it is what my constituents want to hear?

Mr. Evans

I shall certainly give the hon. Gentleman a straight answer in the context of the reaction of any Member of Parliament facing a similar difficulty. I am sure that all hon. Members would share the great concerns that he has expressed. However, he invites me to come to the Dispatch Box as a Minister and to outline the Government's response to the situation. He knows well that the Government are not in a position to intervene, other than in certain circumstances that I shall outline briefly in the course of my remarks.

Before I do so, it is important to list some of the areas in which the Government are providing assistance both in the hon. Gentleman's constituency and, more broadly, in the north-west. I think that the hon. Gentleman will be aware of the work of the local training and enterprise council and Inward in trying to attract businesses to the area. As the Department of Trade and Industry Minister with special responsibility for the north-west, I have been present in the Chamber when the hon. Gentleman has paid tribute to the work undertaken by Inward in an attempt to attract additional investment to his constituency. I know that he recognises that work.

I am also aware that Cumbria training and enterprise council has met Campbell's to offer its guidance and help to employees at this particularly difficult time. The training for work programme has been very successful in the Cumbria area. I understand that 74 per cent. of participants in courses held as part of that programme have gone on to secure other jobs or to engage in further education and training. I am sure that the hon. Gentleman is aware that west Cumbria enjoys assisted area and European objective 2 status, which I am sure will prove helpful in the long term.

I shall now clarify an issue that the hon. Gentleman did not raise tonight but which he has raised previously. The Department of Trade and Industry paid a regional selective assistance grant to the Dalgety company in order to safeguard jobs at the Maryport plant. One instalment of the grant was paid in July 1993. The Government office for the north-west will be seeking the recovery of those moneys in view of the circumstances that the hon. Gentleman has outlined.

Mr. Campbell-Savours

May I press the Minister again on the issue that I raised with him previously? I am seeking a value judgment. Do the Government condemn the actions of multinational companies that go into assisted areas of the United Kingdom which have been helped to grow by Government resources and close down profitable companies irrespective of the impact on the local economy? Ministers must have a view on such matters. I am asking for a value judgment. Do the Government find it acceptable and feel that it is all part of the play of market forces or do they say, "No, we do not like these activities"? I want an honest response about the Minister's position.

Mr. Evans

I gave the hon. Gentleman a fairly honest response previously. Although he is disappointed by the announcement, at least two hon. Members will have gained because new job opportunities have been announced in King's Lynn and in Stratford-on-Avon arising from those circumstances. With respect, I am showing sympathy for the predicament of the hon. Gentleman's constituents.

The hon. Gentleman has mentioned on previous occasions his concern about how takeover rules apply in such circumstances and I am aware of that.

The merger control procedures that we operate under the Fair Trading Act 1973 place a duty on the Director General of Fair Trading to advise my right hon. Friend the President of the Board of Trade on merger matters. The hon. Gentleman will know from his previous questions that the Director General of Fair Trading advises on whether a merger should be referred to the Monopolies and Mergers Commission, but it has to be a qualifying merger. He will know that the general policy that the Government have adopted is to consider the impact of a proposal on the development of competition. That remains our broad policy.

In compiling his advice, the Director General of Fair Trading takes account of all relevant factors, including the views of third parties, but not all mergers are large enough to be considered by him under the Fair Trading Act: one of two tests has to be met. One is that the assets being acquired are worth at least £70 million.

Mr. Campbell-Savours

This is not relevant to Campbell Soups.

Mr. Evans

I am raising the matter with the hon. Gentleman because I am very much aware of the concern that he raised specifically in his press release, drawing attention to the impact of takeover rules. It is important for his constituents that I outline exactly what those rules are and explain that in the circumstances the tests were not satisfied for the merger control procedures to be activated.

The Director General of Fair Trading examined the matter before reaching the conclusion that it did not qualify and that under merger control procedures he was unable to make any recommendation to the Government. In those circumstances, the Government have no power to act or intervene.

Furthermore, I am aware of factors concerning the development of the soup market generally. The hon. Gentleman did not refer specifically to it, so I do not intend to deal with the Government's view of Campbell's role in the soup market.

Mr. Campbell-Savours


Mr. Evans

I am aware that the hon. Gentleman feels that, as he represents the area that is most markedly affected.

In essence, the Government broadly sympathise with the hon. Gentleman's constituents. The training and enterprise council and the inward investment bodies in the north-west stand ready to assist in the development of new job opportunities in Maryport. Although I certainly recognise that the hon. Gentleman remains very worried about the activities of Campbell's, which acquired a plant and closed it down within two months, that is ultimately a matter for the commercial judgment of the company. It is not a matter in respect of which the Government are in a position to intervene.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to Eleven o'clock.