British Aerospace P.L.C., the country’s biggest aircraft manufacturer, will make an exclusive bid for the state-owned car maker Rover Group P.L.C. in an effort to prevent a foreign takeover, the Government announced today. Officials said British Aerospace had been given until the end of April to negotiate terms to buy the Government’s 99.8 percent stake in Rover without competition. If the deal does not go through, the Government would be free to look at other options.
Many industry analysts said they did not see a clear benefit for British Aerospace in a merger with Rover, the former British Leyland, which is the sole British-owned large-scale car maker. The car company has only recently edged back to profitability under its Canadian chairman, Graham Day.
Two years ago there was a political outcry when the Government’s consideration of a sale of Rover to either the Ford Motor Company or the General Motors Corporation was disclosed. British Aerospace, which was privatized in 1985, makes military and civilian aircraft, weapons systems and the wings for the European Airbus.
“This is an ideal solution for our company , our employees, suppliers and our dealers. It will enable us to develop our technologies along new lines.” -Graham Day, Rover chairman
But last night union chiefs , suprised by the move, attacked the merger. The Transport and General Workers said: “We remain convinced Rover should stay in the public sector and are against any move to privatisation.”
ROVER SALE LACKS LOGIC, SAYS GOULD
By Alan Travis
Merger of British Aerospace with the Rover Group put at stake the viability of a fundamental industry and lacked any industrial logic, Mr Bryan Gould , Labour’s shadow trade and industry secretary, said in the Commons. Reacting to the Lords statement by Lord Young, the Secretary of State, Mr Gould said the Government, the major shareholder in Rover, was trying to shuffle off its responsibility for the outcome of the negotiations.
He demanded to know how merger would safeguard employment, protect employees rights, including pensions, and maintain an investment programme in new models. At stake was the survival and future of a crucial British technology and the continuance of thousands of British jobs. In the Lords Lord Young confirmed that BAe had exclusive negotiating rights to buy the Rover group provided these were completed by the end of April.
“If not, we would be free to look at other options.” Conservative MPs generally welcomed the announcement although some expressed doubts about the shutting out of other potential bidders and worries about the position of the car component industry. Lord Young said that it was the common objective of the Government and of the Rover group board to work for the return of the remaining businesses to the private sector.
“Mr Graham Day, the Rover Group chairman, has in recent months been considering the options for achieving this.”
BAe had declared a serious interest in acquiring the government shareholding in Rover “and have asked that the negotiations be on an exclusive basis and I have agreed to this, provided negotiations are concluded by the end of April. If other parties come along and the negotiations did not succeed, then we will be free to look at the other options at the end of that time.”
Legislation to privatise the group would come very early in this Parliament. In the Commons Mr Gould continued his attack, saying: “Is this not a further example of the sort of conglomerate merger that has served British industry so ill in the past? What can British Aerospace bring to this merger? It has no expertise in making motor and commercial vehicles. What hand did the minister have in urging both of them to the negotiating table?”
Mr Gould went on to ask about safeguards for a minimum British share in the merged company including a golden share and a minimum 15 per cent stake, and what would be the position of Mr Day, a Canadian, if there was a requirement for directors to be Brtitish citizens? The Paymaster-General, Mr Kenneth Clarke, said the combination was not surprising, arguing that both BAe and Rover were small in comparison with their competitors. There were other examples of such aircraft automobile link-ups including General Motors, Saab, Daimler Benz and Fiat. Honda had been informed yesterday and had given an initial favourable reaction and the Government hoped their co-operation with Rover would continue.
Mr Michael Grylls (C Surrey NW) argued that the long-suffering taxpayer had supported this particular maiden too long. Mr Richard Page (C Herts SW) put it more bluntly: “The Rover Group does not have a cat in hell’s chance of succeeding as a separate company. It will only succeed under the umbrella of another company or otherwise face the prospect of being irrevocably linked to the taxpayers purse.”
When Labour MPs pointed to £2.9 billion of taxpayers money having been pumped into the company without any return ministers replied that the money had been lost and was not there to be recovered. The Rover group was now expected to declare a trading financial profit at the end of the tax year. Mr Hal Miller (C Bromsgrove) asked Mr Clarke to make clear that the deadline of April 30 was only for the exclusive period of negotiations with BAe and other offers either made before or subsequent to that date would have to be considered by the Government.
Other MPs pressed Mr Clarke to accept further approaches from Ford or General Motors if the BAe talks failed. Mr Tony Favell (C Stockport) pointed out that one of the disadvantages of the party choosing its bidder was that the directors could protect their position.
“The Rover Group board has not exactly covered itself with glory. Would it not be better to allow the market to decide by encouraging allcomers at this stage?”
For the Liberals, Mr Alan Beith (Berwick upon Tweed) said the exclusive nature of the negotiations gave rise to worries. “If there are other bidders why should they be kept out?”
Several Labour MPs, including Mr David Nellist (Coventry SE) accused Mr Day of having taken £80 million from the company pension fund in order to make the balance sheet more attractive. Mr Clarke said the fund was not a significant factor.