Takeovers: Policy (Hansard, 10 March 1986)

§ Lord Grimond
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, the policy on takeovers remains that announced by the then Secretary of State for Trade and Industry, Mr. Tebbit, in July 1984, following a review of mergers policy, that references to the Monopolies and Mergers Commission would continue to be made primarily on competition grounds. In evaluating the competition situation in individual cases, the Secretary of State will have regard to the international context, to the extent of competition in the home market from non-United Kingdom sources and to the competitive position of United Kingdom companies in overseas markets.

§ Lord Grimond
My Lords, I am grateful to the Minister for spelling out once again the Government's policy. But may I ask him whether he thinks that the methods, and indeed the possible results, of the most recent takeover struggles have meant that reference to competition solely is not enough and that there are wider considerations to be taken into account? Will he look at the matter again? In particular, does he not think that the views of workers in the industry who make the value of the assets that are taken over should be given a chance of expression?

§ Lord Lucas of Chilworth
My Lords, a reference to the MMC comes about as a result of a preliminary review by the Director General of Fair Trading, who would take into account all the issues, and they include the public interest and regional policy. I feel that there is ample opportunity for various expressions to be made to the director general, who in turn will report to my right honourable friend the Secretary of State. He then has the task of evaluating that advice with a view to a reference to the MMC.

§ Lord Williams of Elvel
My Lords, in giving primacy to the competition criterion in references to the Monopolies and Mergers Commission, are not the Government encouraging conglomerate takeovers and discouraging proper industrial concentration? Unless the Government can show that conglomerates can manage assets better than other people, what is the sense in that policy?

§ Lord Lucas of Chilworth
My Lords, what the noble Lord says is perfectly fair and is certainly one factor. I believe that it is the publicity given to a number of the more esoteric (if I may use that word) bids that prompts that question. In the main, most mergers and bids are agreed, and certainly those below £30 million. In others, where they are contested or where there are issues that involve the public interest or some of the other factors that I have mentioned, it is reasonable for a reference to be made; and that is consistent with the Government's policy.

§ Lord Bruce-Gardyne
My Lords, is there not also a growing problem about the role that the financial intermediaries are playing in this business? Are there not increasing signs that some of the recent techniques are becoming increasingly exotic? Will my noble friend assure the House that that, too, will be taken into account in the current review which is said to be going on within the department of the rules governing monopolies, with a possible view to changing the whole basis of proof?

§ Lord Lucas of Chilworth
My Lords, as my noble friend will be well aware, new techniques are being developed because we live in a fast-moving and changing society. It is as a result of some of the techniques which are now being adopted (none of which, I might add, are unlawful) that my right honourable friend the Secretary of State has announced that later this year a detailed review of competition policy will be undertaken. I assure my noble friend that the point he makes will be taken account of in that review.

§ Lord Hacking
My Lords, while I am looking forward, on, I think, 20th March to a rather fuller discussion on government competition policy, will the Minister accept that there is considerable concern whether the Government's present takeover policies are operating fairly in the market? Will he also accept that the consequences of their present policies were that one of the two bidders in both the Distillers and Imperial Group takeovers (and I refer in one to Guinness and in the other to United Biscuits) were effectively put out of the bidding by the references to the Monopolies and Mergers Commission; with the further consequence that Distillers and United Biscuits have had to offer large divestments not because it was right after investigation to do so but just to maintain their position in the proposed mergers? Will the—

Noble Lords
Speech!

§ Lord Hacking
—Minister therefore ask the Secretary of State to ensure that there is parity now in the operation of the Government's competition policies?

§ Lord Lucas of Chilworth
My Lords, I too anticipate with some pleasure the debate that the noble Lord is initiating on 20th March, when no doubt he will deploy at greater length some of the points that he has made this afternoon. I accept neither of the two points that he made in the middle of his supplementaries, but I shall certainly ask my right honourable friend the Secretary of State to take account of the last point.

Earl Ferrers
My Lords, does my noble friend not agree that takeover bids by foreign companies of United Kingdom companies, which are financed by an international consortium of banks, the collateral for which borrowing is the asset to be purchased—I refer in this case to Elders bid for Allied Lyons in which I must declare a modest interest, being a minuscule shareholder—are undesirable and should not be encouraged, especially when the British company is not in a position to make a takeover bid for the foreign company?

§ Lord Lucas of Chilworth
My Lords, it would not be for me—I do not believe that my noble friend Lord Ferrers would expect this of me—to say whether I think that bid is good or bad. It is for the reason that my noble friend gives—that of a leverage takeover—that the reference has been made to the Monopolies and Mergers Commission. It is therefore for the commission to consider the public interest in a bid of that nature. Like my noble friend, I look forward, in due course, to hearing its views.

Lord Bruce of Donington
My Lords, is the noble Lord aware that from time to time certain inconsistencies appear in the application of government policy in matters of this kind? Is the noble Lord aware that last June the noble Lord himself, speaking from the government Dispatch Box, was advocating a merger between GEC and Plessey? Can he explain, in those circumstances, why when GEC recently took the step, the matter was promptly referred to the Monopolies and Mergers Commission?

§ Lord Lucas of Chilworth
My Lords, there is no inconsistency whatever in the Government's policy with regard to mergers. As to the reference made by the noble Lord to what I said in June last year, I can do no better than refer him to the relevant columns in Hansard, where he will see that I did no such thing.