Takeover Bids: Servicing Costs (Hansard, 26 January 1987)

§ Lord Beswick
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, no. Information on the costs incurred by companies is a matter for the companies concerned.

§ Lord Beswick
My Lords, I thank the noble Lord for his Answer. Is it not rather strange that the Treasury can spend so much time in examining future plans of the Labour Party without looking at what is happening in the City at the present time? Although it is impossible to confirm this precise figure, is there any reason to believe that there are now hundreds of millions of pounds being gained by these people without any extra wealth at all being created? Is it not also one indication among many of a new breed of operators springing up in the City who are more interested in short-term massaging of balance sheets rather than in long-term industrial investment?

§ Lord Lucas of Chilworth
My Lords, companies themselves are in a better position than those in government to decide on the most profitable use of their resources. It remains for them to make those commercial decisions. It may be—and I quote the noble Lord, Lord Beswick—that a new breed of people are emerging in the City. This is perhaps not unusual since the changes that are occurring in the City bring new and different forces to bear.

§ Lord Molloy
My Lords, the Government have already condemned many of these takeovers in very drastic terms. In order to prevent this kind of thing ever happening again, what do the Government intend to do with regard to legislation?

§ Lord Lucas of Chilworth
My Lords, the Government, with the takeover panel, will be considering the lessons of the present investigations that are going on. Certainly the speed and flexibility of the panel remain considerable assets.

§ Lord Donaldson of Kingsbridge
My Lords, is the noble Lord aware that I left the City in 1932 but was aware even then of the breed to which the noble Lord referred?

§ Lord Lucas of Chilworth
My Lords, I certainly was not aware that the noble Lord had left the City at that time. I am glad to hear his view.

§ Lord Harvey of Prestbury
My Lords, is it not a fact that this Government have done far more than any previous government in tightening up the arrangements in the City over these matters?

§ Lord Lucas of Chilworth
My Lords, my noble friend is quite right. With the passing of the Financial Services Act further tightening has taken place.
I should like to make one other point in answer to the noble Lord. In the present affairs now being investigated by inspectors appointed by the Secretary of State for Trade and Industry there was a demonstration of the Government's continuing determination to investigate irregularities in the City.

§ Lord Grimond
My Lords, while it may be that this Government have done more than any other to tidy up the City, would the noble Lord not agree that a good deal more tidying seems to be needed?
On this Question, is he aware whether the City itself, or the Bank of England, has issued any guidelines about takeovers? Most of these takeovers are by companies owned by large institutions, and these companies as shareholders must also pay these enormous sums of money. Is the noble Lord aware whether the City itself has taken any steps to stop this kind of expenditure?

§ Lord Lucas of Chilworth
My Lords, I do not agree that it is necessary at this time for the Government to take any measures to further tighten those which are already in place. On the point about what the Bank of England is doing with the City institutions, that is its business. As I have said in answer to an earlier supplementary question, at the present moment we have no plans to change the existing measures.

§ Lord Wedderburn of Charlton
My Lords, in view of the Government's new-found desire to tighten up company law considerations in the City, will they now reconsider the relaxation of the measure, introduced in 1981, on the long-standing prohibition of companies financing their own shares? Will they now reconsider their own relaxation of that central rule which is in the middle of many malpractices at the moment?

§ Lord Lucas of Chilworth
My Lords, this Government have consistently sought to eradicate misdemeanours and wrongdoings not only in the City but elsewhere and will continue so to do. The noble Lord will know that an inquiry is in place right now dealing with matters in regard to mergers, takeovers, and also the Restrictive Trade Practices Act.

§ Lord Nugent of Guildford
My Lords, is the noble Lord aware that it would be a mistake to condemn all takeovers because of the irregularities which are at present being investigated? Is my noble friend aware that where the assets of a company are being under-used, if another company can make a proposition which would absorb those assets and make better use of them, that would be to the benefit of the whole 1117 economy; that it is a matter of balance and that therefore we should not lose our heads because of the present irregularity?

§ Lord Lucas of Chilworth
My Lords, I am grateful to my noble friend Lord Nugent of Guildford for his question and, embraced within it, his comments. There is in place a policy that takes account of what my noble friend is suggesting. This has worked extremely satisfactorily.

§ Lord Williams of Elvel
My Lords, is the noble Lord aware that companies reveal the total fees that they pay for an acquisition in their shareholders' circular in the case where they have to circulate to shareholders? In the light of the disquiet expressed in this House would it not be a sensible and modest proposal to make sure that those fees are itemised so that shareholders know how much is spent on merchant banking fees, underwriting, legal expenses and others that would shed light on the problem?

§ Lord Lucas of Chilworth
My Lords, I appreciate what the noble Lord, Lord Williams, is asking. However, in the light of recent events I do not think that it is for the Government to insist upon disclosures of that kind. Surely it is for the shareholders to require their companies to disclose the information which they want. There is nothing illegal in how the companies spend their money, in terms of the way in which the Question is asked.

§ Lord Williams of Elvel
My Lords, is not the noble Lord aware that this is one of the provisions of the Yellow Book of the Stock Exchange? It is therefore within the Government's power to ask the Stock Exchange to amend the Yellow Book accordingly.

§ Lord Lucas of Chilworth
My Lords, this is really a matter for the Stock Exchange. If there are breaches of the Stock Exchange rules and regulations which are, in their turn, in breach of the law, of course the Government will not hesitate to take steps.

§ Lord Beswick
My Lords, is it not a fact that such inquiries as have been made have not disclosed any improvement in the industrial structure of this country as a result of these takeover bids? If so much has been done to clear up the City, why are we hearing so much more about leverage loans, junk bonds, greenmail payments and the activities of the latterday arbitrageur?

§ Lord Lucas of Chilworth
My Lords, I do not think that the noble Lord's first supplementary question could possibly be embraced in the original Question and I should not like to comment on it this afternoon. As regards his second supplementary question, I do not think that over the past 12 or 18 months we have heard any more or any less about the matters which he raised.

§ Lord Thorneycroft
My Lords, is it not rather strange to hear from the Labour Party an argument that a change in the ownership of assets should never have any effect on creating the wealth of the nation?

§ Lord Lucas of Chilworth
My Lords, I think that is a question that would be better addressed to the Labour Party rather than to me.

§ Lord Beswick
My Lords, is the Minister aware that I agree that there was one case when a change of assets did not lead to any deterioration in industrial performance?