Takeovers: Government Policy (Hansard, 17 December 1990)

§ The Minister of State, Department of Trade and Industry (Lord Hesketh)
My Lords, as confirmed in the blue paper review published in March 1988, the Government's main consideration in deciding whether or not to refer a merger to the Monopolies and Mergers Commission is its effect on competition as it affects the United Kingdom consumer.

§ Lord Dean of Beswick
My Lords, bearing in mind our serious trading and financial situation and the reduction in our power as a manufacturing nation, with the resulting unemployment, does the Minister still think that most of the takeovers have been in the interests of the nation instead of in the interests of groups of people motivated by private financial gain?

§ Lord Hesketh
My Lords, on the basis that the majority of shareholders participate in the form of their savings and pensions, it might be worth reminding your Lordships' House that according to a recent European survey, of the top 400 companies in Europe, 120 were British; out of the 50 best performers, 27 came from the United Kingdom.

§ Lard Donoughue
My Lords, is the Minister aware that the most recent research carried out in the City into takeovers and their consequences demonstrates that in the majority of cases there are no financial benefits for the shareholders either of the companies taking over or being taken over? Would it not be appropriate that in future social criteria should be taken into account in these decisions, especially the effect on unemployment?

§ Lord Hesketh
My Lords, the noble Lord makes an interesting observation. I assume that the rights of shareholders will be obliterated in the forthcoming Labour Party manifesto.

§ Lord Williams of Elvel
My Lords, will the noble Lord accept that our questions have been graded at least grade three by the noble Baroness, Lady Blotch? That is close to the top, which is grade one. Will he accept that the question I ask may be grade one? Has he had the opportunity of reading the statement produced by his ministerial colleague, Mr. John Redwood? I apologise for its English. It states: Evidence is rising that, except in the very short-term, takeovers can all too often damage the wealth of shareholders of the bidding company rather than improving it. Only a limited number of British companies have been adept at taking over others, and taking the businesses on to better success". Regardless of what the Labour Party or others may think about it, is this not a strange deviation from the previous principle that market forces should rule?

§ Lord Hesketh
My Lords, I fear that once again we are paying the price of selective reference. For a specific reason, I rather felt that the noble Lord, Lord Williams, or another noble Lord from the Benches opposite would use selective quotations. The figure that I used in my reply to the first supplementary question of the noble Lord, Lord Dean of Beswick, which referred to 27 of the best 50 performers in Europe being British was taken from the same statement.

§ Lord Williams of Elvel
My Lords, what has that to do with the question I asked? Will the noble Lord address himself to the evidence that appeared in the 1979 Green Paper and was subsequently reaffirmed in the document from the Department of Trade and Industry in 1988 or 1989? I cannot remember which year it was. It was on merger policy and stated that mergers were not successful in the broad run. His ministerial colleague appears now to have accepted that. Does it not mean that the Government have a completely different view of takeovers?

§ Lord Hesketh
My Lords, I apologise to your Lordships' House if I have to be repetitive. I fear that selective quotations will not benefit your Lordships. What my right honourable friend said—and I discussed the matter with him—was that mergers should be for the benefit of the shareholders. Thus they should be the responsibility of management. I do not believe that we shall get much further with the noble Lord's suggestion that what my right honourable friend said was entirely different.

§ Baroness Phillips
My Lords, does the Minister accept that the Government have a responsibility for the workers? They always suffer after a takeover: there is an immediate increase in unemployment.

§ Lord Hesketh
My Lords, it is worth remembering that, after allowing for inflation, the average wage in this country has increased by one third during the past 10 years. That is not suffering.

§ Lord Monson
My Lords, can the noble Lord say whether Her Majesty's Government will consider amending the Companies Act so as to give greater 647 protection to minority shareholders who wish to retain a stake in the company being taken over? Does he agree that that would not only be desirable in itself but would have the beneficial spin-off of making takeovers generally less attractive to potential bidders?

§ Lord Hesketh
My Lords, I fear that the noble Lord's suggestion is wide of the Question on the Order Paper. If he wishes to put a Question down I shall be more than happy to answer it.

§ Lord Ezra
My Lords, in a free enterprise society it must certainly be open to one company to make a bid for another. However, does not recent experience in takeovers suggest that in a contested bid the company wishing to take over should be obliged to make much clearer than hitherto the advantage of that operation? Should not the rules of the Takeover Panel be strengthened with that in mind?

§ Lord Hesketh
My Lords, I must refer the noble Lord to my first Answer. We feel that the current system is working more than adequately.

§ Lord Peston
My Lords, will the noble Lord clarify what he said? I take it that his answer is in short simply no, the Government have not changed their policy at all. Some of us thought that we saw light dawning on the junior Minister and his department and that the Government felt that from now on companies might be better occupied running their businesses and raising productivity than engaging in mergers. That looked like the new view. However, it is not the new view; it is not the Government's view that management should devote itself to managing. It is the Government's view that managers should devote themselves to the takeover business.

§ Lord Hesketh
My Lords, I may even do as the noble Lord hopes and rise to that fly cast across the pool. The Government are concerned with excellence. That involves excellence in management, excellence in responsibility to the shareholders and excellence in ability when carrying out a takeover.