Mergers, acquisitions and takeovers: the takeover of Cadbury by Kraft - Business, Innovation and Skills Committee Contents


Examination of Witnesses (Questions 69-118)

IAN LUCAS MP

12 JANUARY 2010

  Q69  Chairman: Welcome to the Committee. I know that you have sat through the other evidence sessions and you want to make a short opening statement, with the emphasis on "short".

  Ian Lucas: Indeed, and I undertake so to do. The Government believes that long-term investment provides the best basis for progress by a successful company and that shareholders should take a long-term view of a company's prospects when making investment decisions. We believe such decisions should have regard to the interests of employees and the tradition and reputation of the company or business concerned. In a takeover companies should be transparent in setting out their vision and long-term plans and shareholders should make their decisions on the basis of those plans. The culture of long-termism predated the discussions we are now having concerning Kraft and Cadbury; indeed, it formed the foundation of the Companies Act 2006 and the reviews undertaken by Sir David Walker and Sir Christopher Hogg which have raised important issues relating to the opportunities for institutional investor engagement in the long-term interests of UK companies. Government has initiated consultation by the Financial Reporting Council on the new investor security code. Tomorrow Lord Mandelson will be hosting a round table of investors, fund managers and companies to consider these important issues. I shall also attend.

  Q70  Ian Stewart: In our briefings it has been pointed out to the Committee that the terms "mergers", "acquisitions" and "takeovers" are sometimes used interchangeably but there are slight differences between them. In this session we have been briefed on the role of the Competition Commission, the Office of Fair Trading et cetera. What we are keen to know now is the role of the Department and the Secretary of State. For the record, can you give a brief explanation of the role that your Department and the Secretary of State in particular play in overseeing mergers and takeovers? In addition, what powers does the Secretary of State have?

  Ian Lucas: The overriding principle is that these matters are dealt with at arm's length. The Takeovers and Mergers Panel deals with the mechanics of the takeover process and monitors and supervises it. If competition issues arise from that the Office of Fair Trading and Competition Commission will investigate and make recommendations arising from it. It is only in limited circumstances that the Secretary of State for Business, Innovation and Skills will intervene. At present those circumstances are limited to national security, issues relating to media ownership and also those cases where the functioning of the economy is severely prejudiced. The position of the Secretary of State is limited.

  Q71  Ian Stewart: Would "national security" include the circumstances described earlier by Professor Bones? In his evidence, which I believe you heard, he said that issues such as the skills base are a matter of national interest and therefore national security.

  Ian Lucas: I believe there is a distinction between national security, which is quite narrowly defined, and the national interest or the strategic interest of the economy about which Professor Bones was speaking. Everyone would accept that if what Professor Bones suggested was implemented it would be a change to existing policy.

  Q72  Ian Stewart: Perhaps some would wish that change to take place. What do you say about the role of the Secretary of State?

  Ian Lucas: The role of the Secretary of State is limited at the present time. Clearly, in the present case there has been a very vigorous debate which has been heightened in the public appreciation by the existence of the Cadbury/Kraft issue; in other words, this was happening before November last when Kraft made its bid. Since my appointment in June I have had meetings relating to long-termism in the economy. It is something that we are very interested in promoting in the context of investment decisions. Part of that is the key relationship as between shareholders and investment managers and the business. We have been working with bodies like the Institutional Shareholders Committee on its code of practice to try to promote a more long-term approach. It is against that backcloth that the present bid has come to public notice.

  Q73  Ian Stewart: As I understand it, there are certain tests in relation to turnover and share of supply that would automatically kick in given the normal structure you describe but that the Secretary of State has powers to intervene should there be a concern about certain processes that do not meet those tests. What powers does the Secretary of State have?

  Ian Lucas: My understanding is that the competition issues would be investigated by the Competition Commission on the recommendation of the Office of Fair Trading. That is as far as possible dealt with at arm's length in order to facilitate transparency and a process that is not subject to political whim. The Secretary of State has said that Cadbury is dear to our hearts and is a great British institution but it is an individual case. When we talk about the rules we must understand that they will affect not just this individual case but all other investment decisions, including inward investment decisions by companies from outside the UK. We must also recognise that there are occasions when inward investment is of great benefit to the UK economy. In short, we must not throw the baby out with the bathwater. There is a very important issue here about long-term investment and investment in the future of British industry. It is important that we have a debate about that in the present context, but we need to look at the full picture.

  Q74  Ian Stewart: Is it right that if the Secretary of State considers there is a finding of an adverse public interest he can issue special intervention notices to enable those structural bodies to address an issue like this?

  Ian Lucas: I am not clear what specific intervention notices you are talking about. I spoke about the three categories that would justify intervention, two being national security and media ownership. To broaden it would involve a change in policy. One would need a resolution of the House and also, as I understand it, a reference to the European Commission. It would be a big step but it would be one that obviously the Government could take.

  Q75  Mr Hoyle: That is the key, is it not? Is the ministerial team frustrated that it does not have those powers or happy not to have them?

  Ian Lucas: The ministerial team is very conscious that there is an issue relating to long-termism and investment. That is why the debate with institutional investors has been initiated and we believe it is very important that shareholders engage much more closely than they have done to date with business and industry when they make decisions about whether to support the Kraft bid or the line taken by Cadbury's management. We are concerned to address whether we can improve the process so that the long-term interests of the UK economy can be better served than at the present time.

  Q76  Chairman: I do not want to be critical but the form of words you used perhaps did not quite express the point as you intended. To make it clear, you said that the Secretary of State would intervene when the functioning of the economy was severely prejudiced. That probably implies the financial system itself rather than other aspects of the economy. Is that right?

  Ian Lucas: The grounds for intervention relate to the operation of the financial system, not the broader functioning of the economy.

  Q77  Chairman: You heard what Professor Bones said earlier about the importance of research and development in food manufacture in the UK but that food security could be a ground for national security interest. Does the legislation currently allow food security to fall within the definition of national security?

  Ian Lucas: That suggestion has not been made to me before and I believe would go beyond the current understanding.

  Q78  Chairman: The reason I ask is that last week one of your colleagues in the Cabinet, Hilary Benn, said that we had to pay greater attention to food security. I happen to agree with him very strongly and welcome what he said. Although I accept that Cadbury's chocolate may not be seen as an essential part of our food security there are lots of other things as well and research and development and support for the agricultural base provided by Cadbury is also part of the food security question. I fully accept that you cannot give me an answer to that question at present, but do you believe that the "national security" test as the law currently stands could be stretched to encompass food security or would it require legislative change?

  Ian Lucas: I am not sure it would require legislative change. I certainly believe that it would be a step which would have to be considered by resolution. If by "legislative change" you mean secondary legislation then it would certainly be a novel step and an extension of policy.

  Q79  Chairman: It would be helpful if when you have talked to your officials after this session you could seek further clarification. I was interested by what Professor Bones said. I had not previously considered that helpful comment. If after this session you believe that your words are not sufficiently precise or there is more you want to add we would welcome a letter just to clarify the situation on this narrow question.

  Ian Lucas: I will certainly do that.

  Q80  Chairman: I just want to push you a bit on where the Government stands. We have been debating long-termism and short-termism for decades; it is one of the oldest debates in the British economy and so there is nothing new about it. I highlighted some bids back in 2006 where long-termism and short-termism played a part. Cadbury is only the latest example of cases on which this debate focuses. When the Secretary of State said in September in his interview with the Wall Street Journal that he was concerned about the impact of these decisions on manufacturing and told the FT in December, "If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population ... and from the British Government", what did he mean specifically? What form would that opposition take because it looks to me like a short-term decision?

  Ian Lucas: I think the form of the opposition would be that we consider any decision not being made in the long-term interests of the UK is one that we would not support.

  Q81  Chairman: What does that mean? What would be the manifestation of that support?

  Ian Lucas: We have to be clear about the fact that the Government has taken the very broad policy decision not to intervene in individual takeover bids unless there are very specific grounds, on which we have already touched, to justify it. That is why it is important to emphasise that we cannot base our general policy on individual cases. Hard cases make bad law.

  Q82  Chairman: But the quote by Lord Mandelson in December was specifically about this takeover. He also said last week that "investors should expect to brave the court of public opinion if they are motivated only by short-term profit." All of these are great words for which I have a good deal of sympathy. You said in your opening statement that there was to be a round table session tomorrow. Is that the public manifestation of what Lord Mandelson said in September and December and last week or was it already planned?

  Ian Lucas: The project relating to long-termism may be something that has been established for some time, but the initiatives to which I referred was the decision by the Institutional Shareholders Committee to have a new code of practice relating to engagement between shareholders, fund managers and business. That and the decision to refer to the Financial Reporting Council the terms of the new code of practice are novel decisions taken in the past few months. They predate this particular issue but reflect the view that where the Department sees market failure it may take steps to intervene. That is part of what the process is all about. We consider this may be a case where there is market failure and we want more long-termism and we are taking specific actions to develop that.

  Q83  Chairman: This is a case or issue where you may see market failure?

  Ian Lucas: The issue is one of market failure. Insufficient long-termism may in our view be a characteristic of market failure.

  Q84  Chairman: I do not want to put words into your mouth. I understand you are constrained as to what you can say about this particular bid, but are you saying that this particular bid may represent market failure?

  Ian Lucas: I make very clear that because of my ministerial position I cannot talk about this specific case, but if a decision is made on the basis of short-termism alone and that is clearly at variance to the long-term interests of a company and industry that could be a market failure.

  Q85  Chairman: To be clear, the comments by Lord Mandelson that I quoted earlier suggested he was considering a review of the law governing takeovers and looking at shareholder and other issues as well. Is a formal review going on?

  Ian Lucas: No, but one of the phrases Lord Mandelson has used is that he is initiating a debate on the matter. That is not something we have had just as a result of his comments but it has been spurred on by those comments. I believe that across the political spectrum and indeed into other areas there is an appetite for this debate to take place. It is an important debate for the future of UK industry.

  Q86  Chairman: We have been having this debate for two or three decades; it has peaks and troughs.

  Ian Lucas: I believe this is a peak.

  Q87  Chairman: You heard what Professor Bones said about the possibility of attaching conditions to takeovers relating to, for example, the relocation of manufacturing, research and development and training. Is that an issue you are looking at or is it a new idea?

  Ian Lucas: Professor Bones did refer in general terms to a number of proposals. The issue is: what specifically would be workable if one decided that that was an avenue down which we wanted to go? I have had discussions with investment managers on issues such as this and they talk to me about the deterrent effect that specific proposals would have. Let us not run away from the fact that this is a difficult issue. If there were an easy solution all of us would have come up with it.

  Q88  Chairman: You heard Mr Dromey talk earlier about what European competitors or colleagues were doing to protect their industries. I was interested in that and meant to ask him for a more formal note on it. It struck me that he might have done some research on it and I could have informed myself of it. It suggests that there are European countries doing things in this area and possibly we could do things ourselves.

  Ian Lucas: We could indeed do things ourselves. Many of the things that have been done in terms of giving preferential status to long-term shareholders could take place now in the UK under the Companies Act 2006, but the situation is that companies decide not to introduce that form of provision within their articles of association. The powers are there already. The issue is not so much to do with whether the legislative framework exists; it is more a matter of culture. One of the interesting aspects of UK businesses is that we tend to have a broader shareholder base than, say, companies in Germany.

  Q89  Chairman: Is the Government prepared to consider the idea of attaching conditions to the relocation of manufacturing, R&D and so on?

  Ian Lucas: That is part of the debate we are talking about.

  Q90  Chairman: When will this debate be concluded? An election is coming up and that gets in the way of a lot of things at present.

  Ian Lucas: We have a meeting tomorrow when we shall discuss issues. I have been talking about these sorts of issues with institutional investors for the past two to three months, so it is happening at this time.

  Q91  Chairman: Will the Government make a formal statement about its conclusions on this debate?

  Ian Lucas: We will keep the Committee informed as to the progress of the discussions.

  Chairman: I think that is a "no".

  Q92  Mr Clapham: When we look at the aspect of research and development we see that Cadbury has developed a very successful research arm. It employs 200 workers. The Chairman asked what we might be able to do to ensure that continues. One consequence of the movement of research and development tends to be the loss of the anchor. R&D tends to anchor down industry. Is there anything we can do to ensure that the research and development facility developed by Cadbury remains here?

  Ian Lucas: One thing we can do related to the supply side is ensure that the nature of the research and development that takes place in the UK, and the reason why Cadbury is the successful company it is, remains because of the quality of the research and development that we offer at the present time. In certain cases that is the reason why companies come to the UK and make inward investment. They want to benefit from our research and development. It is very often a reason why British companies are more attractive than others. We want to make sure that those skills and capabilities within a company are not transferable because we want the quality of the research here to be better than anywhere else. That is why the Department focuses heavily on sustaining and developing strong science and research within our universities. In my role I should like to do more to develop links between universities and business to anchor that research and development within the UK.

  Q93  Mr Clapham: In the debate that is to take place how we can keep research and development in the UK will be a crucial part of the discussions. Currently, we face a situation where if this takeover comes about that R&D facility could easily move so that all the benefits from research and development you have just explained are lost. There may be little we can do about that in this particular takeover bid, but for the future is it something that you are looking at very seriously in the sense of having some kind of regulation of or guarantee by overseas companies that takeover UK companies to ensure we retain research and development facilities?

  Ian Lucas: I think it is very difficult for Government to impose conditions on companies that invest as to the future conduct of their business in the UK. We have talked about investment by companies from overseas which may be very negative as far as the UK is concerned, but we should also recognise that there are other examples in the automotive sector. BMW Mini is an inward investment into a British company that has had very positive benefits for the company and the product and has led to a positive outcome. We are having this debate because these are difficult issues. I believe we must look at both sides of the coin and recognise that if we constrain an outside investor in the decision he makes about the long-term future of the business in which he is investing that may be a deterrent to investment in the UK. When we weigh whether we want to impose the type of constraints you have indicated we have to think about what the consequences might be.

  Q94  Mr Clapham: I appreciate that it is a difficult situation, but one hears that our competitors, the Dutch, Germans and Belgians, are already looking at how they might make their market mechanisms work better. If there were to be developments that we did not adopt it could affect competitiveness, could it not? Is this likely to be part of the debate so that we move from over-indulgence of the financial market to the manufacturing market but do so in the context of making it work better?

  Ian Lucas: This takes us back to the issue of shareholder engagement. I think that individual shareholders and institutional shareholders need to look at things in the longer term.

  Q95  Mr Hoyle: Obviously, what we are seeing is protectionism by European competitors to look after their industry, so it is important that the debate you are now having comes to fruition very quickly if we are to save what is left of British UK manufacturing. To go on to R&D, what discussions have taken place between your Department and Defra, because this could have a major implication for agricultural science and where we need it to be in future? At the same time, the big debate is about the security of food supply within the UK.

  Ian Lucas: Do you mean as it relates to this particular bid?

  Q96  Mr Hoyle: To Cadbury.

  Ian Lucas: I cannot give you that information now.

  Q97  Mr Hoyle: To generalise it, have discussions taken place with Defra?

  Ian Lucas: I cannot give you an answer to that now; I will have to let you know. I would be surprised if there had not been discussions but I am not personally aware of them.

  Q98  Mr Hoyle: It is not that you are constrained from speaking about it; you just do not know?

  Ian Lucas: I am not aware.

  Q99  Mr Hoyle: Obviously, food security and R&D are very important in agriculture. We could end up losing this as part of the takeover by Kraft. Do you share my concerns on that?

  Ian Lucas: Clearly, both R&D and food security are important issues. This is an aspect that has been raised by the Chairman and is an interesting one that I shall look into after this session.

  Q100  Mr Wright: Turning to shareholders' rights, you have said that shareholders should take a longer-term view when investing. The reality is that when offers such as that from Kraft are on the table it is out of the hands of the shareholders; it is the fund managers who will take the decision. Do you agree with Professor Bones' argument that shareholders and fund managers have different objectives?

  Ian Lucas: They should not have because the fund manager works for the shareholder. I believe that the shareholder should make that relationship clear.

  Q101  Mr Wright: Surely, the fund manager will take a view on the value of the offer rather than the long-term prospects of the company?

  Ian Lucas: Not necessarily, because it may be that the long-term return on shares is better if the fund manager takes a long-term view. The issue of long-termism is related to the period over which one looks at value. There may be a short-term benefit in selling at a particular time, but it may be that over a longer period the benefit is to retain the shareholding. It is important that the shareholder who owns the shares makes clear his or her wishes relating to the role of the fund manager.

  Q102  Mr Wright: The chairman of Cadbury has said that the offer by Kraft undervalued the company. If Kraft came back with another offer, say an increase of 20% or 30%, fund managers and probably the chairman of Cadbury might well say that it is in their interests to accept it because it is a financial incentive rather than a longer-term commitment by shareholders who may well take the view that it is far better to invest in what is a profitable company?

  Ian Lucas: The fund manager should act in the financial interests of the shareholder rather than his own personal interest. I am a solicitor, albeit I do not practise. If I acted on behalf of a client I would not act in my own personal interest. It is important that the shareholder makes clear that it is his or her interest that is taken into account. In the particular example of Cadbury there will always be a level at which a bid will be accepted as I believe Professor Bones says in his written evidence to the Committee, so in his mind it is a question of price, not principle.

  Q103  Mr Wright: There are obviously two areas of interest here: BIS and the Treasury. What discussions have you had with the Treasury on these issues?

  Ian Lucas: There have certainly been discussions with the Treasury. The Walker review is Treasury-led but clearly is closely linked to this debate and formed part of the discussion I had with institutional shareholders recently. It is very much an issue that we need to deal with in conjunction with the Treasury.

  Q104  Mr Wright: Will that form part of the round table discussions tomorrow?

  Ian Lucas: Yes, it will.

  Q105  Mr Wright: In terms of the Government's responsibility do you believe it has a role to play in standing up for shareholders against large fund managers, or is that something we should leave well alone?

  Ian Lucas: I believe Government needs to make clear to shareholders that they should be running the show. In the context of this particular bid, which is a very high profile, controversial one, it can only be in the interests of us all that shareholders take an active interest in the bid and the instructions they give to the fund managers.

  Q106  Mr Wright: Last month in a press statement Lord Mandelson stated that "he would continue to take a very close interest in whether shareholders played a full part in corporate governance, and whether they took a long-term view of their responsibilities as shareholders." I take a very close interest in Norwich City but I do not turn up to every match. What do you think he meant by "take a very close interest"?

  Ian Lucas: I think it means making clear the role of the shareholders and its importance and the level of control they have in terms of indicating to the people they have asked to deal with their shareholdings what they want. The more we promote that with shareholders and encourage them to take a longer-term view the better it will be not just for UK Plc but shareholders themselves.

  Q107  Roger Berry: Why should what is in the interests of shareholders necessarily be the long term?

  Ian Lucas: It is difficult not to touch on Cadbury but that company has particular characteristics, culture and history within the UK and it is a long-term project. We need to look as a whole at the UK economy and recognise that any business requires sustainable investment.

  Q108  Roger Berry: There is a strong case for looking at the long term from the point of view of the economy. My question was: why should shareholders look at the long-term view? I do not have any shareholdings but if I did I would be looking at making as much money as possible. I assume that is what people who buy bits of paper try to do. There is absolutely no reason on earth why they should be committed to the long term. Getting fund managers to do what shareholders want them to do is not the same as ensuring there is investment in the long-term interests of the British economy.

  Ian Lucas: But if every individual shareholder took a short-term view overall the long-term functioning of the economy would suffer because there would be a lack of long-termism.

  Q109  Roger Berry: Exactly! The financial crisis is an example of that. I genuinely do not understand the idea that the long-term interests of the economy are guaranteed by focusing on what shareholders want to do because they, like everybody else, will look at the short, medium and long-term. If it is in their interests to make more money by focusing on the short term they will make decisions based on that, will they not? Therefore, it is not a solution to the problem simply to say, "All power to shareholders!"

  Ian Lucas: The present capitalist system in the UK operates on the basis that shareholders are given the prime role in making decisions relating to share investment in companies. That is the position as set out under the Companies Act 2006. That is the capitalist system which has been broadly accepted as the basis upon which companies should operate. Even though you may not hold shares—we do not pry too much into Members' finances—clearly any investment, whether it be in pensions and issues of that nature, is part of the broader economy. I would encourage any individual to be interventionist, if you like, in the way his or her money is invested in terms of linking into the UK economy. It may not be precisely in the form of shares; it may be an investment in some other form, but I think that to make clear to fund managers what one wants to see in terms of the investment of one's own money is a very healthy development.

  Q110  Roger Berry: I think the Government is right to say that an example of market failure is one where there is failure to address the long-term interests of the economy or business, but I do not understand and you have not yet explained to me how giving greater power to shareholders will secure that outcome. If the solution of the problem of short-termism is more shareholder power I simply ask: how does that greater power address the problem? I genuinely do not understand how it does so.

  Ian Lucas: If everyone operated on a short-term basis then the performance of those shares as part of the broader economy would be less good than if everyone acted on a long-term basis.

  Roger Berry: That is the way markets work and that is an example of market failure.

  Chairman: Encouragingly, I disagree with Roger Berry on this point. Different shareholders take different views. In the case of one shareholder perhaps his daughter is getting married next month and he would not mind maximising the capital value of his shares so he can get out when he is ahead and fund the wedding. Others will save for the long term and want investment income over a longer period. They are not interested in an instant capital gain but want a steady dividend flow. We are speaking now indirectly about shareholders in Cadbury. I am sure the MPs' pension fund invests in Cadbury's shares. I would like it if the trustees of the fund wrote to whoever manages the fund and told them not to sell the shares to Kraft and that to secure the long term we should stick with Cadbury. Our pension scheme is a funded one which often people do not recognise. For me the long-term interest is served by not selling those shares. How far down can you drive that? You talk all the time about the shareholder, but as we have heard from Professor Bones the vast majority of shares are held by a handful of institutions that never ask the individuals whose money is being used by them what their interests are. Quite often in the short term they maximise performance to get a good rating and league table next year in the Sunday Times or whatever it is. There is always short-term pressure on the managers of these funds and, unlike Roger Berry, I believe that if you give the shareholders as best you can a greater say the result may be imperfect but it will be better than the current arrangement. Is that the kind of issue that the Government is looking at?

  Q111  Ian Stewart: In line with the Chairman's comments, with which I agree, are you not also arguing that if shareholders are more active in the decision-making process informed decisions are better than ill-informed ones?

  Ian Lucas: As a general rule, informed decisions are better than ill-informed ones. We are engaging with institutional investors and fund managers in the process I described earlier to try to find a way to make UK fund managers invest more on a long-term basis.

  Q112  Chairman: Will you look at Professor Bones' specific suggestion that they should consult with the people on whose behalf they hold and vote those shares, that is, a block for, a block against or a block abstention depending on the wishes of the shareholders? Is that an interesting idea to explore?

  Ian Lucas: It is an idea. If the company decided that that was what it wanted to do it could do that already; it is not prohibited by present legislation.

  Q113  Chairman: Could we not oblige fund holders to consult with those on whose behalf they act? As a holder of a PEP and ISA at present I have no way to express my view and tell the manager of those how to behave.

  Ian Lucas: If we were to oblige companies to do that it would be a policy change that would probably require legislation. I believe that 40% of stock exchange investment comes from overseas companies which is a relevant matter that also needs to be considered.

  Q114  Roger Berry: You said that the role of the Secretary of State in all this was somewhat limited. One thing he could do on behalf of the taxpayer is pick up the phone to RBS which is owned by the state and say he does not wish the bank to be engaged in helping with a takeover bid. That would be simple and straightforward, would it not, so why not do it?

  Ian Lucas: When RBS was in receipt of taxpayer funding it was made absolutely clear that the business was to operate at arm's length from Government and that was the basis on which it was operated. I understand that Kraft has had a long-term relationship with the Royal Bank of Scotland. If the Secretary of State were to do that not only would he contradict the policy outlined previously in general terms for one individual case but also interfere in a previous relationship between RBS and Kraft. Arguably it could also be said that in doing that he would be making a judgment on the merits or otherwise of the bid. I think that would be a very difficult course for any Secretary of State to take.

  Q115  Roger Berry: All Governments have their stated policies including dealing with matters at arm's length. They appear to spend a lot of time in meetings with chief executives of companies and people like that. What do they talk about if they are not saying what they believe it would be a good thing for those companies to do? Surely, there could be a nod and wink in the direction of RBS that this is frowned upon. Is that not possible?

  Ian Lucas: I do not think a nod and a wink is an appropriate way to deal with it. I talked earlier about the importance of transparency in these arrangements and the need for a structured procedure to be followed in what is a very intense period when takeover proposals are put forward. It is important we have rules, that everyone is clear what those rules are and that when the position becomes difficult we do not immediately veer away from them. If we have a very uncertain system it may lead to less investment in UK business.

  Q116  Roger Berry: I appreciate that present policy is that Government would not use its shareholding in a bank to elicit a particular response to a hostile takeover of a UK company, but is that an area of policy that the Government might consider revisiting?

  Ian Lucas: I do not think our policy would be determined on the basis that the company was not a UK business in the way you have described it. We do not want to intervene in specific instances and cases unless there is a reason for doing it in line with pre-existing policy.

  Q117  Roger Berry: Are you saying that you would not want a publicly-owned financial company to be one of the instruments of intervention but you would do it in some other way?

  Ian Lucas: If we wanted to intervene then it would not be appropriate to do so in contradiction of Government policy by using the method you have described.

  Q118  Chairman: I know it is a difficult time for ministers in terms of what they can say when a controversial bid is in process. I have a note that you want to refer to a particular matter. If that is the case I happily give you the opportunity to do so.

  Ian Lucas: I want to make clear that I have made an error. The round table meeting of investors is on Thursday, not tomorrow.

  Chairman: It makes all the difference! I cannot help noting there is a certain irony in the fact that whilst RBS may be paying for Kraft's acquisition Cadbury is being advised by Goldman Sachs, Morgan Stanley and Union Bank of Switzerland. There seem to be rather different criteria in operation in this bid. Thank you, Minister. We look forward to seeing what happens.





 
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