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John MacGregor’s ‘dynamite’ letter to Lord Young disclosed for first time
7:59am Monday 23rd December 2013 in News
Dear David [Lord Young],
The current bid by Nestlé for Rowntree and the accompanying threat from Suchard raise an issue of considerable importance both to the food and drink industries, for which I am sponsoring Minister, and to industry generally.
My concern is with reciprocity. The circumstances and importance of the Rowntree case, and the growing political criticism to which it is giving rise, are such that we do now have to face up to this issue.
The whole basis of our approach to mergers and acquisitions has been that, provided they do not have an adverse effect on competition, we should wherever possible leave it to market forces, operating freely, to determine the outcome.
The bidding company and the target company have the opportunity to bid or counterbid and in the end the shareholders determine the outcome, as they should do. But it is clear that this kind of free operation of market forces is not possible in this case.
The position in Switzerland was described in yesterday’s cable from Zurich of which your officials have a copy.
The conclusion is clear that an unfriendly takeover of a Swiss company, a majority of whose shares are registered (and we understand that both Nestlé and Suchard are in effect in this category) by a foreign company “is, for all intents and purposes, impossible”.
The essential pre-condition for the effective working of our policy is therefore missing and market forces are not permitted to work.
Although I would have preferred this matter to be considered by Ministers, I suspect that under the legislation the courses open to us are more restricted.
If that is the case, than I suggest that the Nestlé bid for Rowntree should be referred to the Monopolies And Mergers Commission with a specific request to them to consider the question of reciprocity.
I am sending copies of this letter to the Prime Minister, Geoffrey Howe, Nigel Lawson and Sir Robin Butler.
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