MPs try to block VSEL sale

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The Independent Online
A takeover bid by defence giant GEC for VSEL, the submarine manufacturer, was overwhelmingly opposed by MPs who gave evidence to the Monopolies and Mergers Commission's inquiry, it emerged yesterday.

The weight of political opposition surprised GEC, known for its hard lobbying, and adds to the growing unease about Michael Heseltine's decision to give both GEC and British Aerospace the green light to make takeover offers.

The news comes as GEC and BAe were putting the final touches to their bids, following yesterday's publication of VSEL's profits, which rose 5.7 per cent to pounds 64.5m.

BAe is expected to make a bid worth around pounds 18 a share, though an offer was thought unlikely today. Any offer is expected to have a large share element following the recent strength of BAe's share price.

Meanwhile, 11 of the 12 MPs who gave evidence to the MMC said GEC should not be allowed to bid or that a takeover could restrict competition in the defence industry. These included nine Conservatives.

Mr Heseltine, President of the Board of Trade, over-ruled the MMC, whose report said a GEC takeover would reduce competition and could lead to the Government paying higher costs for warships. Two members of the six- strong team said GEC should be cleared.

Intense lobbying followed referral of the competing bids last year but only one MP supported GEC at the MMC investigation. John Hutton, the Labour MP whose Barrow-in-Furness constituency includes VSEL, diplomatically said the company would benefit from a link with either GEC or BAe.

The other MPs, some with both BAe and GEC interests in their constituencies, were opposed. Robert Atkins expressed "grave concern'' at the implications of a GEC acquisition. Julian Brazier said it would create an effective monopoly. Phil Gallie said GEC should provide binding guarantees to keep open its Yarrow shipyard.

Nicholas Winterton said he was concerned and disappointed that Mr Heseltine went against the majority MMC report. He would be contacting other MPs who gave evidence to see if they could take further action. "GEC is politically as well as commercially powerful, but whether that made an influence on Mr Heseltine I do not know.''

A GEC source said: "Some MPs like to oppose GEC simply because it is GEC. We concentrated our efforts on Mr Heseltine where we thought we would get better value. At the end of the day we got the decision we wanted."

The jump in VSEL profits to pounds 64.5m from pounds 61m was widely expected, but there was a suprise jump in the net cash inflow, from pounds 322m to pounds 411m, because of early payments by customers.

VSEL's cash hoard is highly attractive to BAe, though analysts said the figures did not reveal anything that would significantly alter the terms of a BAe or GEC bid.

The MPs opposed

rRobert Atkins: South Ribble (Con)

rJulian Brazier: Canterbury (Con)

rIan Bruce: Dorset South (Con)

rSir John Cope: Northavon (Con)

rPhil Gallie: Ayr (Con)

rThomas Graham: Renfrew West (Lab)

rJohn Hutton: Barrow-in-Furness (Lab)

rWilliam McKelvey: Kilmarnock (Lab)

rKeith Mans: Wyre (Con)

rGary Streeter: Plymouth Sutton (Con)

rNicholas Winterton: Macclesfield (Con)

rTim Wood: Stevenage (Con)