View from City Road: Sit tight at Owners

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The Independent Online
FIRST came the Tebbit doctrine. Then the Lilley doctrine. Is there now a Heseltine doctrine on competition policy?

The decision to clear Airtours' bid for Owners Abroad suggests two things about the President of the Board of Trade's approach to bids.

First, he has scant regard for advice given by the Office of Fair Trading. Yesterday's clearance for Airtours is the second time in a month that Sir Bryan Carsberg's push for a monopoly investigation has been rejected. The former consumers' champion at Oftel has had a fiery baptism at the OFT and he must be wondering why he bothers turning up at the office.

Second, Mr Heseltine has allowed free markets to operate without hindrance even though there were genuine competition worries about the Owners bid.

It has caused a great deal of concern, justifiably, among consumer groups, MPs and the Association of Independent Tour Operators.

The coming together of Airtours and Owners would create a duopoly of very powerful, vertically integrated holiday companies - each owning high street shops, airlines and tour operations.

There are two aspects to the duopoly issue - consumer choice and barriers to entry into the industry - that should be enough to warrant a thorough investigation by the Monopolies Commission. Airtours and the market-leading Thomson would have control over more than 60 per cent of the market, making it difficult for newcomers to get established in the travel industry.

Now that Airtours' bold gamble on escaping an investigation has paid off, it has to turn to the other main issue - the bid stakes. Yesterday's reaction by the market can be interpreted only one way; the current terms of its pounds 225m paper bid, valuing Owners' shares at 113p against a market price of 129p, are not high enough.

After more than a month of pushing its industrial case for taking over Owners, Airtours must now be in the throes of pitching in with a higher bid.

Owners shareholders, therefore, should sit tight. Not only could Airtours lift its bid, but there is also the outside chance that the German masters of Thomas Cook will launch a counter-offensive.

(Photograph omitted)