Babcock and Wilcox Ltd. And Herbert Morris Ltd.

HC Deb 23 February 1977 vol 926 cc571-3W

Mr. Terry Walker

asked the Secretary of State for Prices and Consumer Protection when he expects to publish the report of the Monopolies and Mergers Commission into the existing and contemplated merger situation between Babcock and Wilcox Ltd. and Herbert Morris Ltd.; and whether he will make a statement.

Mr. John Fraser

My right hon. Friend received the report on 20th January and it is being published today. The Commission was divided in its views. Three members held that a Babcock and Wilcox acquition of Herbert Morris would be contrary to the public interest in that it could endanger the satisfactory development of Herbert Morris by putting at risk the effectiveness of its management and hence its successful progress in improving productivity, developing new products for home and export markets and modernising its manufacturing plant. It would also, in their view, put at risk sales by Herbert Morris in markets served by the American Chain and Cable Company Inc.—ACCO, a subsidiary of Babcock and Wilcox—of such of its products as are similar to those made by ACCO. These adverse effects would not, in their view, be offset by the possibility of advantage to Herbert Morris from the availability of financial support from Babcock and Wilcox, from sharing in its research and development resources and from the use of its overseas representation. These members, therefore, recommended that the proposed acquisition should not be permitted. They also felt that the existing Babcock and Wilcox shareholding in Herbert Morris would enable it materially to influence the latter's policy and indeed, obtain representation on the Herbert Morris Board—which would involve the same risks as acquisition. They therefore recommended that that holding should be reduced to not more than 10 per cent; and that until such reduction Babcock and Wilcox should not exercise voting rights in respect of more than a 10 per cent. holding.

In contrast, two members, including the Chairman of the Commission, held that while in recent years Herbert Morris had been a successful and enterprising company it would not suffer any prejudice from union with a group as well established, well organised and well managed as they considered Babcock and Wilcox to be. In particular, they saw no reason to doubt the strength of the future management once things had settled down: nor did they see any reason why Babcock and Wilcox should be less keen than Herbert Morris to develop sales of the latter's products in North America, through ACCO or otherwise. Moreover, they put greater weight than did their colleagues on certain technological, marketing and other advantages which Babcock and Wilsox had to offer. They, therefore, saw no ground for con eluding that either the existing or the contemplated merger situation would operate against the public interest.

Where, as in this case, the reference has been considered by a group of members of the Commission, my right hon. Friend can only take action under the Act in respect of the merger or proposed merger if at least two-thirds of the members of that group have found the merger to be against the public interest. Since there is not a two-thirds majority, no action under the Act is possible in this case. Moreover, the arguments for and against the merger are finely balanced, as is evidenced by the minority report signed by the Chairman of the Commission. There are, therefore, no grounds for further intervention by my right hon. Friend, and the outcome must now be determined by those directly concerned.