Dana Petroleum: Should we beware of corporate raids by foreign governments?
The last Conservative government would have tried to block it, but suddenly companies controlled by foreign governments are bidding for private firms. Twenty years ago Tory trade secretary Peter Lilley designed a doctrine that prevented other countries’ nationalised businesses buying up UK assets: now it is getting rather common.
The state-owned Korea National Oil Corporation has made a £1.9bn hostile bid for Dana Petroleum Plc (LON:DNX). GDF Suez, the French utility group where the Paris government is the largest shareholder, is taking a 70 per cent stake in International Power with the approval of the British company’s board. China’s nationalised Sinochem is named as a potential white-knight to save PotashCorp being bought by BHP Billiton.
There was a similar fashion for companies that were offshoots of foreign governments to bid for UK companies 20 years ago – particularly state-backed French firms trying to takeover UK privatised utility companies. That’s why the Lilley Doctrine was devised by the Tory cabinet minister: put bluntly it tried to veto such overseas bids. Ironically, without this doctrine, International Power might not still be an independent company capable of becoming a subsidiary of the French state vehicle.
Brussels did not like the Lilley Doctrine and it had to be adapted at best, dropped in reality – and for most of the intervening years, it wasn’t tested because few if any foreign governments attempted a takeover.
Does it matter if foreign governments try to buy British companies? Is a Korean state oil company bidding for Dana worse, say, than an American food company buying Cadbury? It is interesting that all the bids so far are in the energy and resources sectors, but unless they affect our continuity of supply, a free-market doctrine dictates they should be allowed to proceed.
Lilley’s objection was that bids from wings of overseas governments are not part of the free market: if these companies are being subsidised by their foreign states the playing field is not level. Maybe, but if that means firms from abroad can use foreign taxpayers’ money to overpay for shares in UK companies, why should we stop them?
Anyway, with the UK state portfolio back up to strength after the privatisation of the last Conservative government, perhaps Britain’s nationalised industries may want to start making bids for companies across the channel? Royal Bank of Scotland and Lloyds are currently having to sell assets to comply with EU concerns about subsidies, but it may be that before the state sells its last shares, these banks start expanding again through acquisition.
