State-controlled Assets (Hansard, 4 February 1981)

§ Mr. Tebbit

Arrangements have been completed for the offer for sale by Kleinwort, Benson Limited on behalf of my right hon. Friend the Secretary of State for Industry of up to 100 million ordinary shares of 50p each of British Aerospace Public Limited Company at 150p per share, payable in full on application. The offer for sale has been underwritten by Kleinwort, Benson Limited, Hill Samuel and Co. Limited, Morgan Grenfell & Co. Limited and J. Henry Schroder Wagg & Co. Limited.

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The prospectus will be advertised in the newspapers on Monday 9 February 1981, and will be placed in the Library on that day. Application lists will open at 10.00 am on Friday 13 February 1981.

Of the ordinaiy shares being offered for sale 66,666,667 are new Ordinary Shares which my right hon. Friend the Secretary of State for Industry has agreed to subscribe at the offer price and which will be paid for out of the proceeds of this offer for sale, thus raising £100 million of new equity capital for British Aerospace PLC.

The Government have made arrangements for each employee of British Aerospace PLC who is eligible under the terms of the British Aerospace employee share ownership scheme to be offered, free of cost and at the Government's expense, 33 ordinary shares—worth approximately £50—to be held on his behalf by the trustees of the scheme. In addition, the Government have arranged for up to 2,178,990 ordinary shares to be available to eligible employees for purchase at the offer price—subject to a limit of 600 ordinary shares per employee and to scaling-down in the event of over-application by such employees; each employee who purchases shares under this arrangement and vests them in the trustees will then have appropriated to him, free of cost and at the Government's expense, an equal number of ordinary shares to be held on his behalf by the trustees. In addition, preferential consideration will be given to applications received from all employees at the offer price; and so far as possible, the Government's intention of promoting the widest possible ownership of shares will be taken into account when making allocations in the event of over-subscription.

Immediately after the offer for sale the Government will hold the same number of shares as. are sold under the offer for sale—that is, between 48.37 per cent. and 50 per cent. of the issued share capital of the company—the balance of the issued share capital being those shares acquired by or on behalf of the eligible employees under the special arrangements which I have described.

In order that British Aerospace PLC should remain under the control of citizens of the United Kingdom and Colonies, the articles of association of the company restrict the number of foreign-held shares at any one time to 15 per cent. of all voting shares in issue.

It is intended to meet the costs of the sale from the receipts. A Supplementary Estimate will be submitted to seek parliamentary authority for this.

The following is the text of a letter which has been written by my right hon. Friend the Secretary of State for Industry to the chairman of British Aerospace PLC concerning the future relationship between Her Majesty's Government and the company.

Dear Sir Austin,

HM Government as customer

There will be no change in the relationship between the Ministry of Defence as customer and the Company as contractor consequent upon the Offer for Sale. British Aerospace is, and will continue to be, treated by the Ministry of Defence in accordance with the same criteria as other United Kingdom defence contractors with contracts awarded to meet United Kingdom defence requirements either by tender or, in the case of non-competitive contracts, subject to the profit formulae and post-costing arrangements agreed by HM Government and the Confederation of British Industry.

HM Government as shareholder

Following the Offer for Sale HM Government will have a shareholding of between 48.37 per cent. and 50 per cent. of the issued share capital of the Company, depending on the number of shares acquired by or for the benefit of the employees of 157W British Aerospace under the special arrangements relating thereto. HM Government is prohibited by section 7 of the British Aerospace Act 1980 from using its powers under that Act to increase the proportion of Ordinary Shares it holds following the Offer for Sale. The only other relevant provisions under which HM Government might acquire shares in the Company are contained in Part II of the Industry Act 1972 as amended by the Industry Acts 1975 and 1980. Any acquisition made under those provisions would not be subject to the limit imposed by section 7 of the British Aerospace Act 1980 on the proportion of Ordinary Shares which may be held by HM Government. However, HM Government could only acquire shares under those provisions if the Company itself sought financial assistance and if the Secretary of State was satisfied that such assistance could not, or could not appropriately, be provided otherwise than by him.

Following the Offer for Sale HM Government does not intend to sell any more of its shareholding in the Company for the foreseeable future. HM Government has also made it clear that, in any event, it intends to retain a shareholding conferring more than 25 per cent. of the voting rights ordinarily exercisable in general meetings.

HM Government does not intend to use its rights as a shareholder to intervene in the Company's commercial decisions. It would be repared to use its voting rights in cases where it wished to prevent an alteration to the provisions of the Company's Articles of Association relating to United Kingdom control, to the nationality of the Directors or to Government Directors. It might also wish to vote its shares in opposition to a resolution proposing the election of a Director believed to represent foreign interests. It does not expect to vote its shareholding in opposition to a resolution supported by a majority of the Board in other circumstances, although it retains the power to do so.

Under the Company's Articles of Association HM Government has the right to appoint two non-executive Directors to the Board and HM Government has now appointed Mr. K. M. Bevins and Mr. K. Durham as Government Directors. The Government Directors have no special powers and their duties, like those of all directors, are to the Company as a whole. The Government Directors are generally not entitled to vote at any Board meeting on any issue relating to a contract or proposed contract with the Company to which the Crown (or a person acting on behalf of the Crown or a company of which the share capital is wholly-owned by or on behalf of the Crown) is a party.

Sales support

The support of HM Government in relation to overseas sales will continue to be available to British Aerospace on the same basis as to other United Kingdom companies. Where there are in existence Memoranda of Understanding between HM Government and overseas governments relating to contracts entered into by British Aerospace, HM Government's undertakings under these Memoranda of Understanding will continue to be honoured. The Offer for Sale will not cause HM Government to change its criteria for entering into new 158W Memoranda of Understanding. Existing facilities provided by the Export Credits Guarantee Department will be unaffected by the Offer for Sale. The Export Credits Guarantee Department will be prepared to consider applications from the Company for further facilities in exactly the same way as it would consider applications from any other company.

Airbus Industrie

HM Government reached an understanding, embodied in Principles of Co-operation established in 1978, with the governments of France and Germany to support the Corporation's participation as a full member of Airbus Industrie from 1st January, 1979 and to stand behind the Corporation in the discharge of its financial obligations to Airbus Industrie. These Principles now apply equally to the Company. HM Government has informed the French and German governments that the change in legal constitution and ownership of British Aerospace brought about by the British Aerospace Act 1980 and the Offer for Sale will in no way weaken the support of HM Government for participation by British Aerospace in the Airbus programme.

HM Government finance

The Company will have the same eligibility for government finance as other companies in the private sector, and as the Corporation's predecessor companies had prior to nationalisation. The principal statutes likely to be relevant are the Civil Aviation Act 1949, under which HM Government may give assistance for the design, development and production of civil aircraft, and the Industry Act 1972 (as amended), under which HM Government may give assistance to provide employment in the assisted areas or in the national interest. Any application for such government finance will be treated on its merits, and will be subject to the general guidelines and financial limits that may apply at any time in relation to the relevant statute.

Creditors

Persons who were creditors of the Corporation and its wholly-owned subsidiaries immediately before 1st January 1981, the date on which the undertakings of the Corporation vested in the Company, are protected by section 9 of the British Aerospace Act 1980. This section provides that outstanding liabilities of the Corporation, which at the date of vesting became liabilities of the Company, or which may become liabilities of the Company under section 8 of the Act, will be discharged by the Secretary of State in the event of the Company being wound up except merely on a reconstruction or amalgamation. Under section 8 of the Act, the Company is liable for the judgment debts of companies which became its wholly-owned subsidiaries on the day of vesting where the cause of action arose before that day.

These provisions do not apply to obligations entered into by the Company or its wholly-owned subsidiaries after the date of vesting. Except as provided in section 9 of the Act, HM Government will have no commitment to meet the debts of the Company or its subsidiaries after the Offer for Sale.

Yours sincerely,

Keith Joseph.