Seanad Éireann debate -
Wednesday, 13 Jul 1988

Vol. 120 No. 16

Adjournment Matter. - Proposed Takeover of Irish Distillers.

Mr. Ross

With the permission of the House of the 20 minutes I have, I intend to give in this order Senators O'Toole, Murphy, Cregan and O'Shea two minutes each.

I propose this motion with some relish and, indeed, some surprise because as an unapologetic promoter of free trade and free competition I felt that instinctively I would be on the other side of this bid. Indeed, when this bid was made I felt that way. Having looked in detail at what is going on behind this Irish Distillers bid, who is behind it and what their possible intentions are and the potential damage that they can do to this country, I believe that this is a classic case for the Minister to use the power which he has under the 1978 Monopolies and Mergers Act.

This bid infringes — if ever there is a classic case of infringement — the doctrine of fair trading and fair competition for which this power was put in. I understand the Minister's position and I do not want to anticipate his reply. I know the matter is now before the Fair Trade Commission and I know that that puts the Minister in a slightly awkward situation to pronounce or to express an opinion on it at this stage.

On the other hand the Minister must understand my situation because this is the last time I can actually raise it. The Seanad will be in recess when the Fair Trade Commission reports on 5 August and probably for a while after that when the Minister makes his decision. The timing of it is slightly unfortunate. As much as anything else I want the Minister to hear what we have to say at this stage rather than get a reply from him which kicks for touch — which I expect will actually happen.

The first thing I want to say to the Minister about the recommendations of the Fair Trade Commission is that, whatever recommendations are made, and perhaps the recommendations will be to block the bid, the Minister should consider whether he can enforce them. If the Minister decides to allow the bid with certain stipulations as recommended by the Fair Trade Commission, the one criterion and the most important one is whether he can actually enforce the stipulations he makes himself. Let us make no bones about it. Probably many of the decisions made after that time, if the bid goes through, will be made outside the jurisdiction of this country and of course his writ does not run there. That is the most important thing the Minister should consider.

The bidders' case for Irish Distillers rests on one principal fact alone and that is that Irish Distillers have been a sleepy company, with a bad profit record and have not performed particularly well. That is something which, by implication, the Irish Distillers company themselves admit in their document and in their statements. They say quite simply that they have got to change and have recently changed their marketing techniques. They admit implicitly that all has not been well in the past with Irish Distillers but they also say, and I believe them and I think others should look at the statements and what they have said beforehand, that the future for Irish Distillers, with their new marketing programme, is a rosy one and this should be examined before any decision is made.

I think it carries great credibility but the bidders have made a very clever commercial move. In fact, it is very similar to another bid for Abbey, another Irish company, by French Kier not so long ago. When the bidders see a company which is about to take off, they say to themselves: "Right, we had better nip it in the bud before it shows the sort of profits which would be out of our reach". It is my belief, and I think it is the belief now of many institutions around the city of Dublin who hold the shares in Irish Distillers, that Irish Distillers was about to take off and that this, while being a great commercial decision by the bidders, is an opportunist bid and, as a result, we should look at it in a different light. That does not offend the rules of commerce but it should be realised that Irish Distillers are on their own now. There is a very great probability that Irish Distillers, its products and its exports would take off this time.

I hold absolutely no brief for the defence which says quite simply: we must keep Irish whiskey Irish, "Keep the spirit Irish" as the slogan goes. That does not wash with me and it is not a good argument. However, there are good arguments about Irish employment, about Irish consumers and about Irish shareholders. They have got to be looked at in a non-nationalistic but in a highly sensible way because 1992 does not mean that we become slaves to British and European industry. The Act is there particularly to protect us from that.

What the bidding company has done, and it is something which the Minister must look at when he is looking at the bid, is that it has created a camouflage. It states in the film which many of us went to see in Buswells, and in its document, that GC & C is an Irish company. I think it should be put on record, that what it has done is to create a company and put Irish directors on board and make it look Irish, but that company as anybody who looks into it in any detail at all, is fully owned by British companies and will be fully controlled by British companies in the future if this take-over goes through.

Why would they have to disguise this? Why have they gone to such enormous efforts to disguise the fact that they are a British company? It is simply and solely to convince the Minister and politicians that they are an Irish company and not a British company. In the offer document which GC & C Brands, as they call themselves, which is a shell company, have issued they try to establish their strong Irish roots, as they call them; in 26 lines they mention the words "Irish" or "Ireland" 17 times. It is vitally important to them to prove their bona fides of being Irish. They are not Irish. That should be established. Whether it is relevant or not I do not know but it is relevant in one way in that the considerations of Guinness and Allied-Lyons and Grand Met. who are the parent companies, will not be for the Irish workers, they will not be for the Irish consumer and they certainly will not be for the Irish shareholders because if this bid is allowed to go through there will not be any Irish shareholders any more. It will be a fully owned company from abroad.

The Minister should also look at the fact that the profits of this company, if there are profits, and if there are increased profits, will also be in the hands of overseas companies. The profits will be repatriated like it or not. The profits will go back one way or the other to Allied-Lyons and Grand Met. and to Guinness. It is undeniable that that is the case and it is also undeniable that while that may be good commercial stuff for the people involved in buying the company it is patently against the national interest that this should happen. That is why this clause is in and that is why the Minister should consider exercising it.

I should like to make a couple of points about Guinness and about the promises in the document. GC & C will say that it is not, of course, their intention to play ducks and drakes with the Irish whiskey industry, that the fact that Guinness own 49.6 per cent of C and C which is making the bid, and the fact that they have a dominance in Scotch brands will be irrelevant because they will say, and they say in this offer document, that Guinness, in fact, will have no say in the day-to-day running of Irish Distillers when and if it is taken over. I find that difficult to believe. I would remind the House of one thing, that in this document which I hold here, the offer for Irish Distillers, they declare, "we intend that the bottling of Jameson for the US market, currently being carried out in the US, will be returned to Ireland." One noble intention to convince us to allow this through.

The document also states, "it is important to emphasise that Irish Distillers' products will continue to be produced at the Midleton and Bushmills distilleries and that all key business activities will continue to be located in Ireland". That is a noble intention but I would remind the Minister and the House that the promises made in that document are not worth the paper they are written on. I will have to remind the House when saying this that they can take all the promises in the world in this document but I ask Members to remember the controversial bid which Guinness made before for Bells and which Guinness won. What is considered by many to be the prime reason why Guinness eventually won that bid and took over Bells was because they promised they would move their headquarters from London to Scotland. To my mind that was the telling decisive factor in that take-over bid. Guinness's headquarters remains in London to this day and that promise was forgotten about the moment that the votes were counted. That is important.

I ask anybody who reads this document to discount the promises in it, to look at it in the cold light of day, and to look at the potential damage that can be done. It is absurd for Guinness who have three members on the board of C & C and to whom this will cost approximately £50 million, if not more because it values Irish Distillers at £200 million — on value rule of thumb it will cost Guinness £50 million — to say that Guinness will have no input into this, that Guinness will be a sleeping partner. No company worth its salt could possibly put £50 million into an operation of this sort and say, "Get on with it, all right it is fine if it helps Scotch Whisky here but it does not matter". There will be an obvious conflict of interest if this bid goes through and Guinness is the prime example of where that conflict will lie.

Whereas it would be absolutely correct in certain circumstances to allow take-over bids to go through, it is utterly wrong that the Minister should not use his power where indigenous industry is involved, where the Fianna Fáil manifesto itself, in fact, promised to protect indigenous industry and where, in fact, there is a confusion. There is a confusion about being modernistic about 1992 which is about free trade and fair trade and is not about unfair trade and about conflicts of interest. I believe this is the classic case. The Minister should not be embarrassed, he should not be shy and he should not be coy about using his power in this case. Simply, 1992 is not about allowing monopolies to come in and damage Irish industry.

Mr. J. O'Toole

I will not take my two minutes. In supporting Senator Ross I should like to put it on record that a company which controls 60 per cent of the Scotch market is a threat, and not a support, to Irish industry. Such is the nature of the firm which is bidding for Irish Distillers. This move, were it to go through, would be regressive rather than progressive. What we are looking at here, and what we are discussing, is the future of hundreds of jobs, the future of some historic labels and bands which are, in a sense, export earners and foreign currency earners. It seems to me that companies that produce Paddy, Bushmills and other brands are part of what we are in a very real sense. In discussing this take-over bid today we are discussing the jobs of future generations. I believe we do not have a right to sell the jobs of future generations. That would be the inevitable consequence of this take-over.

I would also like to put on record my abhorrence of the role played so far by the financial institutions such as Irish Life which, being State owned, should act in the national interest. That company has been quick enough to test the market, to sell shares but has not issued a word of support for Irish Distillers. I call on those financial institutions who are always talking about creating a climate for investment here, about the need to work and belt-tighten and invest here, not to, like Irish Life, act with unseemly haste, the haste of the proverbial rats leaving the sinking ship, and put profit before people. That is unacceptable. It seems to me that what we are looking here is an attempt to create profits which will go down the plug hole of repatriation if we are not careful.

Professor Murphy

I should like to thank Senator Ross for allowing me to share his time and to point out the specific Cork implications of what is at issue here, indeed more than Cork. Of the total Irish Distillers workforce 30 per cent is in the Cork and Waterford areas. A lot of other companies depend on the ancillary supply services to Irish Distillers in the Cork area. The total number employed by Irish Distillers in the Cork area is 189. Though the jobs in Midleton itself are not immediately at risk there are no guarantees there.

I would like to point out that the employees in Midleton and, indeed, in Irish Distillers as a whole are very much committed to the company. They have accepted voluntary redundancies in the recent rationalisation and are now very much committed to the company as it is. That commitment is, in part, based on a long tradition of family service in the company. What is most vulnerable in this context is the substantial plant in the North Mall in Cork, the bottling, distilling and cooperage plant. It is a matter of common knowledge now that their jobs are on the line. That is the single most important threat there.

The alarm bells are ringing in Cork, a city which has suffered grievious body blows in recent years with the closing of Ford, Dunlop and Verolme. Indeed this is a classic case of what happens when outside interests control native industry. Sunbeam, Ford, Dunlop, Beamish and Crawford all can attribute their troubles to the fact that outside interests have taken over and pay little regard to local interests. On all those scores, and as someone with a particular commitment to the Cork area and, I may say, as someone who is an apologetic, old-fashioned economic nationalist, I support Senator Ross's proposal.

Mr. Cregan

I should like to thank Senator Ross for allowing me two minutes. There is a big worry in Cork. As a publican I am aware that the constant crib of those in the drink trade is about monopolies. Those in the drink trade in Dublin worry because they cannot get drink from other areas due to the monopoly held by Guinness in that city. In comparison with other areas, the people in the trade always emphasise that it is wise and good to have other people in competition with them.

In a monopoly situation it is a big worry that people can come in — as Senator Murphy has already pointed out — who have already bought out companies such as Dunlops, Ford and Beamish and Crawfords. Jobs were lost in Beamish and Crawfords because another monopoly company — an outside company — bought a particular product that will not be produced or canned any more in the Cork region. That is a big loss to the Cork area.

I would like to point out in the one minute I have left that the people who are committed to Irish Distillers and to Cork Distillers are part of a very old tradition in Cork labels, for example, Cork Dry Gin. This will now only be a label. It is frightening that a packaging plant that was upgraded at a cost in excess of £2.2 million 18 months ago, where a rationalisation programme has taken place and most important of all, where a profit sharing scheme for the workforce is being strongly pushed by the management of Irish Distillers between the workforce and the management to make sure that the takeover goes ahead.

The profits this year for Irish Distillers are 37 per cent. The company seeking the takeover cannot speak likewise. The Scottish Whisky company — since they have been taken over by this particular company — are at a loss. The figures show that Bells and Teachers, on the American market, are losing out to the Irish products — Bushmills and Jameson — which are selling very well. That is how the profits arise as the Irish product is out-selling other products. Baileys is the only Irish product which is produced by that company that is out-selling Bushmills or Jameson and its sales are on a par with the Russian product, Smirnoff. These companies see that the Irish product is at last coming into its own. The two products — Bushmills and Jameson in particular — are being pushed by Irish Distillers. People are drinking less of the Scotch whiskys. There is something in what Senator Ross has said, that the company who are trying to take over, see the light and see that the product that is being made should be kept in Irish hands for the benefit of all of us and in particular for the workers. The profits made every year go back into the company and that should continue to be the case. I do not think the takeover would be a wise decision.

Mr. O'Shea

I, too, would like to thank Senator Ross for affording me this opportunity. I have a couple of brief points to make. It would seem to me that three of the four largest firms involved in the drinks industry in the Community are ganging together to take over an indigenous firm. The nature of multinationals is that they are beyond any particular national control. I am very concerned about one small industry in my own area, which is presently part of the distillers group, because the nature of multinationals and the nature of this type of conglomerate is that you close your smaller units and move in to the centre. In general the Labour Party are concerned about the type of rationalisation that would follow the acceptance of a bid such as this, the consequences for jobs, the fact that profits that should be remaining inside the country could be moved out. I realise that the matter rests with the Fair Trade Commission but there is a more general question here that should be addressed through the Community and which should be pushed forward by our own Government and that is the extent to which multinationals can come together to virtually eliminate opposition and to work the whole business of rationalising, which is about doing away with jobs. It is about maximising profits and in this instance, we are moving down a road where it would be against the national interest both in terms of the profits, which would be generated by Irish Distillers, and in terms of the jobs, which from the Labour Party's point of view is the major issue and the major concern.

Minister of State at the Department of Industry and Commerce (Mr. S. Brennan)

As the House is aware, I have been notified by GC and C Brands Limited — a newly established joint venture company formed by the Cantrell & Cochrane Group Limited and Gilbeys of Ireland Limited — of their intention to purchase the entire issued ordinary share capital of Irish Distillers Group plc. Such proposals require detailed examination by me under the Mergers, Take-Overs and Monopolies (Control) Act, 1978. This Act applies to every proposed merger or takeover where the value of the gross assets or the annual takeover of each of two or more of the enterprises involved is less than £5 million or £10 million respectively. The proposed takeover of Irish Distillers is notifiable under this criterion of the Act and involves detailed consideration of the extent to which the proposed takeover would be likely to prevent or restrict competition or to restrain trade or the provisions of any service to endanger the continuity of supplies or services to effect employment and be compatible with national policy in relation to employment.

The examination will also seek to establish the extent to which the proposal is in accordance with national policy for regional development and is in harmony with Government policy relating to the rationalisation, in the interests of greater efficiency of operations, in the industry or business concerned. Any benefits likely to be derived from the proposed takeover, such as research and development, technical efficiency, increased production, efficient distribution of products and access to markets are also being examined. The interests of shareholders, partners and employees in the enterprises involved will also be taken into consideration in arriving at my decision as, indeed, will the interests of the consumer.

On the basis of all the information available to me I referred the proposal involving the offer by GC and C Brands Limited for the shares of Irish Distillers to the Fair Trade Commission on 6 July 1988. I would remind the Seanad that the Commission have been given until 5 August next to furnish their report to me of their investigations into the proposed takeover. In their report, the Commission must state their opinion as to how the proposal would operate in relation to the common good in respect of the scheduled criteria of the Mergers, Take-Overs and Monopolies (Control) Act, 1978, the details of which I have already outlined. Having considered the Commission's report I am empowered to approve the proposal to make an order prohibiting the proposed takeover or to allow it to proceed on the basis of conditions that I may specify in the order. I fully appreciate the concerns which Senators have expressed to me here today. I have listened very carefully indeed to each and every speaker and have taken careful note of the points which have been made. Consideration will be given to these views and to the concerns which have been expressed in the making of the decision. I wish to assure the House formally that the proposed takeover of Irish Distillers is being given a very full and rigorous examination by me under all the powers available under the Mergers, Take-Overs and Monopolies (Control) Act, 1978. I know Senators understand — as was pointed out by Senator Ross — that it would be inappropriate for me to comment further on the matter while detailed consideration of the proposal is still underway.

Mr. Ross

I should like to thank the Minister for his reply and to say that I understand totally the fact that he cannot go into detail, nor can he give any commitments. I would just ask him to take into account, when the decision is being made, the very serious points made here today concerning the depth of public opinion — as I understand it — and the consumers, but particularly the workers, in Irish Distillers, about this issue and to weigh those remarks up very carefully before he makes a decision.

The Seanad adjourned at 4.50 p.m. sine die.