§ Mr. Warren
asked the Secretary of State for Trade and Industry if he will make a further statement about the privatisation of Rolls-Royce plc.
§ Mr. Channon
Subject to market conditions, the Government intend to return Rolls-Royce to the private sector in April or May 1987.606W
The Government will retain a special share in the company, which will enable them to ensure that Rolls-Royce remains under United Kingdom control. Under the articles of association the proportion of foreign-held shares in the company will be limited to 15 per cent., and these provisions will be protected by the special share. In addition, disposals of more than 25 per cent. of the company's assets, or of significant assets used for nuclear business, will be subject to the special shareholder's consent. It will also be a requirement that the chairman, managing director and at least 75 per cent. of the board shall be United Kingdom citizens. Finally, individual shareholdings will be limited to 15 per cent. The limit on individual shareholdings will also be protected by the special share, but will lapse on 1 January 1989.
The Government have also reached a decision on the appropriate capital structure for Rolls-Royce following privatisation. At present, the company operates with the backing of assurances first given by my hon. Friend the Member for Woking (Mr. Onslow) on 22 February 1973, and confirmed by successive Governments, that the Government would ensure that the debts of the company would be met in the extremely unlikely event of a liquidation. As previously announced to the House, it is the Government's view that following privatisation the company should have a capital structure such as to enable it to operate without the need for such Government assurances.
The Government have decided accordingly that, as part of the arrangements for and at the time of the proposed offer for sale, they will subscribe an amount of new ordinary shares which, after deducting such expenses of the offer as are payable by Rolls-Royce, will give net proceeds to the company equal to the net borrowings of the company and its subsidiaries (including obligations under finance leases) as recorded in the consolidated audited balance sheet as at 31 December 1986. These new ordinary shares (which will be subscribed conditional on the offer for sale being completed) will form part of the shares made available under the offer for sale.
From the time of the completion of the offer for sale the previous Government assurances referred to above will cease to have effect.
The Government have informed Rolls-Royce of their decision on these matters and the company has welcomed the Government's commitment as a sound base for its future operations.