§ The following Question stood upon the Order Paper:
§ 74. Mr. GRIMOND: To ask the Chancellor of the Exchequer what information he has about the proposal made to the Burmah Oil Company by British Petroleum; and if he will make a statement.
§ The Chancellor of the Exchequer (Mr. Reginald Maudling)
With permission. I will now answer Question No. 74.
I understand that on 27th June the British Petroleum Company and the Shell Petroleum Company made proposals to the Burmah Oil Company for the capital reconstruction of the Burmah Oil Company, and the acquisition by British Petroleum and Shell Petroleum of the whole of its share capital as reconstructed.
As this involved the issue of new shares in British Petroleum and thus affected the capital structure of British Petroleum, Her Majesty's Government were consulted beforehand by the company and saw no reason to object.
The Government's right to appoint ex-officio directors to it is unaffected by the changes proposed.
§ Mr. Grimond
I ought to say that I have an interest in a few shares in Shell and Burmah—[Laughter.]—so it will be seen that whatever happens I stand to win.
I wish to ask two questions. Can the Chancellor clear up rather further the position of the Government directors on the board of B.P.? Did they take part in this decision? They cannot claim to be entirely sleeping directors in a matter of this importance.
Secondly, is he aware that Burmah is one of the most important Scottish companies and that if it is broken up that will be a further step in the centralisation of economic power in London, which is said to be against Government policy, and that in this case the 205 Government have had means at their disposal for stopping this break-up or take-over? Will they use those means?
§ Mr. Maudling
Government directors on the board of B.P. have a power of veto, but it is established practice over many years that the Government as such do not intervene in the commercial operations of the company. Because this matter went beyond normal commercial operations, the Government were consulted, and we said as a Government that we had no reason for objecting to what was proposed.
On the latter question, I see the right hon. Gentleman's point of view, but the operations of the Burmah Oil Company are predominantly outside the United Kingdom, so the problem does not really arise.
§ Mr. Callaghan
On the question of control, has the Chancellor looked at Section 184 of the Companies Act, which, of course, takes precedence over the articles of association, and which says that a company has power to remove a director by resolution? Can he tell us whether he is satisfied that even in the light of that Section of the Act there will be no difficulties about practising control if the deal goes through?
Secondly, the right hon. Gentleman said that the Government saw no reason to raise objections, but were there any discussions about the desirability of this change? If so, can he tell us why it was thought that this was a desirable move, especially in view of the pledge given by the President of the Board of Trade, eighteen months ago, that the Government were reviewing their policy towards operations of this size to see whether mergers of this nature, involving capital of this description, should be allowed to continue? As we have not heard a word from the President of the Board of Trade since about that review, can the Chancellor tell us whether in discussions with B.P. and Shell he raised the question of the principles which should guide amalgamations or mergers of this sort?
Finally, can I take it—I suppose that this is clear, but it would be a good thing to have it on the record as there were rumours of an American bid for the Burmah Oil Company—that if this company passed under the control of 206 B.P., or even if it did not, in no circumstances would the Government allow an American or any other foreign oil company to take over an interest which was so vital to Britain?
§ Mr. Maudling
I should like to look at that Section of the Companies Act, but I am advised that the Government's right to appoint directors to the board and their power of veto cannot be amended except by an amendment of the articles of association. As the Government will still retain 48 per cent. of the total voting power if the deal goes through, the second point is academic.
The question of mergers has arisen when mergers have been for the purpose of reducing competition in the home market, but this deal, if it goes through, will not affect the home market at all. As I said, the operations of the Burmah Oil Company are predominantly overseas.
The hon. Gentleman's third point, about a possible U.S. bid, is hypothetical.
§ Sir C. Osborne
Is my right hon. Friend satisfied that the economic gains from this merger outweigh the danger of further monopoly? Secondly, is he aware that there were serious misgivings in the Stock Exchange about a leak of this information before it was announced, which caused a rise in the price of shares to the disadvantage of shareholders who did not know?
§ Mr. Maudling
The question of monopoly does not arise in this case. The second matter is one for the Stock Exchange Council.
§ Mr. Callaghan
May I press the Chancellor on whether he had discussions with B.P. and Shell about the desirability of the merger in view of the size of the operation, because the capital involved in this operation is larger than that involved in the I.C.I.-Courtaulds take-over which involved such political controversy at the time? It is, therefore, right to know whether the Government are concerned with any principles in a matter of this sort.
Surely, on my third question, it is not hypothetical for the right hon. Gentleman to say that we would not permit a foreign oil company to take over a British interest of this sort.
§ Mr. Maudling
That was certainly a hypothetical question. If it were a question of taking over B.P., in which the Government have a majority shareholding, the situation would be very unusual.
The position is that the Government do not, in practice, interfere at any time with the commercial operations of B.P. It was put to us as it involved a change in the structure of the company. We saw no objection and I cannot see any objection on grounds of public policy to B.P. going ahead and exercising its own commercial judgment in the matter.