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Finance: Hostile Takeover Bids

Volume 727: debated on Tuesday 26 April 2011


Asked By

To ask Her Majesty’s Government what is their policy towards hostile takeover bids by foreign interests of United Kingdom companies of national or strategic significance.

My Lords, the United Kingdom has a tradition of welcoming long-term foreign investment that can bring in new technologies and skills. Ownership of companies is a commercial matter for the companies concerned. Where mergers may affect the public interest, powers exist to protect issues such as our national security.

My Lords, so far as it goes, that is a fine Answer and I entirely agree with it. I suggest, however, and I hope that the Minister agrees with me, that some takeovers from abroad may have serious adverse consequences for the consumer interest, for the workforce or for both, and that some takeovers come from countries that do not themselves allow the process of a takeover bid in the reverse direction—in other words, there is no reciprocity. Does the Minister agree that there are provisions in the Enterprise Act 2002 that enable the Government, in the case of concerns of national strategic importance, to intervene? I think that the phrase is that “an intervention notice” may be submitted. If that is not satisfactory, the Act provides for statutory orders to be made to the same effect. Has the Minister considered these matters in relation to a Bill that she knows a great deal about, the Postal Services Bill, under which Royal Mail shares will be made publicly available and might, unless something is done about it, be purchased for a foreign entity?

The noble Lord will know that the Postal Services Bill is still in this House. While no decision has been taken on the formal method of sale, we would certainly not rule out the sale of shares in Royal Mail to foreign-based companies. The noble Lord, Lord Borrie, knows from his experience as director-general of the Office of Fair Trading that we have methods in place to make sure that any bids we look at will be right and proper for the safe concern of the future. The Government’s objective, as noble Lords know, is to secure the future of the universal postal service and to maximise value for the taxpayer. You can be assured that this Government will do what is best for Britain.

My Lords, the noble Lord, Lord Borrie, spoke about reciprocity. Just because the Americans or the French can be protectionist, we should not be protectionist. Does the Minister agree that we are one of the most open economies in the world and should be proud of it? Furthermore, does she agree that protectionism is one of the greatest dangers to our globalised world economy at the moment? On the other hand, will the Minister tell us how we prioritise industries as being of strategic significance or not? A takeover is not just about broken promises, as in the case of Kraft and Cadbury; a hostile takeover disrupts the supply chain and all the other companies involved with the target companies. How do the Government intend to deal with that?

There were a few questions there. Yes, we should allow for open global trading because it is best for us, best for the world, best for our companies and best for the jobs that we need in this country now. Noble Lords will know that there are consultations going on at the moment over the Takeover Code, corporate Britain and the competition regime. We are reviewing all of them to make sure that we have the best methods in place to take us forward in the coming years.

My Lords, bearing in mind the success of acquisitions by UK companies of several overseas companies in several jurisdictions—and following the point made by the noble Lord, Lord Borrie—in formulating government policy on this issue, will the Government confirm that they will look at the risk of reciprocal actions by other countries were we to restrict takeovers in the UK?

I thank my noble friend. Yes, the Secretary of State is, as I have said, now looking at the Takeover Code, corporate Britain and how it looks to the long-term focus for this country. I am absolutely sure that he will consider that at all times.

My Lords, does the noble Baroness recall that it was I who first tasked the Takeover Panel to look into these matters in the wake of the Cadbury takeover? While it was never my or the Government’s intention to introduce or apply a nationality test in the case of foreign takeovers, I was conscious of the potential sensitivity and possible conflict of interest in the energy sector. What would be the Government’s attitude to a foreign bid for a UK energy utility from outside the European Union?

There were two questions there. One was about the Cadbury acquisition by Kraft, which raised wider questions, as we know, about short-termism and shareholder engagement. They are being considered as part of the reform of the Takeover Code and the Government’s call for evidence on the long-term focus for corporate Britain. Yes, I agree with the noble Lord on that. As to whether the Government would act to stop the takeover of a British energy company, I am unable to comment on any specific case. However, any proposed merger involving the supply of energy and its infrastructure would be subject to robust scrutiny and considered on its merits.

The concerns of the four Members of the House on the other side are fairly widely shared. I declare an interest as a former member of the Takeover Panel. What are the arrangements now for keeping the Takeover Code up to date?

The Takeover Code is, as I have said, being reviewed at the moment. The Government strongly support the proposed changes to it, which will significantly strengthen the UK’s takeover regime.