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Dáil Éireann díospóireacht -
Tuesday, 24 Oct 1989

Vol. 392 No. 1

Adjournment Debate. - Arklow LPG Company.

Deputy Liam Kavanagh gave notice of his intention to raise on the Adjournment the subject matter of the proposed closure of Ergas Limited in Arklow. The matter is in order and in accordance with our new Standing Order the Deputy has some 10 minutes to make his case and the Minister has five minutes to reply.

I am grateful for the opportunity to raise a very serious problem that has arisen not just in my constituency but in a few other areas of Dublin as well. A public announcement made last Friday on behalf of the company, Flogas, indicated that they intended to acquire the shares of another LPG company, Ergas. For the benefit of the Minister I will quote from The Irish Times report of 21 October where it says:

Flogas, the publicly quoted liquid petroleum gas (LPG) company yesterday confirmed that it is to acquire the entire issued share capital of Ergas and Ergas (NI), two companies within the Royal Dutch Shell Group for £12.7 million. The acquisitions will be funded by a rights issue to shareholders to raise £10.06 million.

The deal involves a major rationalisation at Ergas. The company's plant in Arklow and its office in Dublin are to be closed. The rationalisation is expected to result in 50 redundancies.

Further on it says:

The acquisition is subject to re-conditions which include the receipt of relevant government and regulatory consents. It involves the granting of options to a Shell company to acquire 770,000 shares in Flogas at a price of 260p over a five year period from the completion of the acquisition.

The Minister knows the difficulties for the town of Arklow in relation to unemployment. The Minister visited Arklow during the course of the general election campaign and no doubt he was made well aware of the devastating situation with regard to employment in Arklow and in the whole of County Wicklow. This further news that an industry is to close in Arklow adds to the many blows which this town received over the last decade. I hope that in considering the preconditions to this takeover of Flogas the Minister will bear in mind the seriousness of the problem that will occur in Arklow as a result of this takeover, and the problems of the unemployed in Arklow.

Arklow is a distribution point for Ergas who also have a distribution point in Ballymount industrial estate in Dublin and offices in Dún Laoghaire. The statement says that about 50 jobs in these three areas, 25 in Arklow, are to be discontinued. The material for filling the gas bottles is imported through Arklow and the dock workers there work on the boats in which the raw material is imported. As well as that there is considerable revenue to the harbour board in fees and dues as a result of this trade. All these sectors will be affected by this decison. The Minister should be aware of the repercussions this will have.

Arklow is an unemployment black spot. The latest figures I have is that there are about 900 people unemployed in the town and in the immediate area covered by the unemployment office the total unemployment is about 1,400. This is an increase of about 100 in a year, from November to November. The percentage of employable people who are unemployed in Arklow is at 30 to 40 per cent. Since the last census was taken in 1986 emigration from the town of Arklow has been enromous and so it is difficult to get a base from which to apply the unemployment figure in Arklow vis-à-vis the present population. Arklow had a population of about 8,000 men, women and children and assuming that about 50 per cent of them would be employable, my figure of one in three being unemployed in the town is not excessive. A television debate which took place in connection with the European election showed Arklow as being one of the unemployment black spots.

In the last decade, as the people in this House know, local industry in Arklow has been devastated. Noritake, a Japanese industry which makes high class pottery, closed their Arklow plant with the loss of about 400 jobs in the early part of this decade. In 1982 Avoca Mines closed with the loss of about 200 jobs and the old traditional industry, Arklow Pottery, has seen the numbers employed reduced by over 50 per cent. The Irish Fertiliser Industry, the big industry in the area, formerly know as NET have seen the numbers employed drop from a high of 1,400 to about 300. That industry was one of the main employers in the area and the reduction of jobs there was a devastating blow to Arklow. These are the big loss leaders in the Arklow area but many more small industries including service industries that depended on the big industries have gone to the wall or are in difficulties. Although the loss of 25 jobs in Ergas may seem small, in the light of all the jobs lost in Arklow, it is another serious blow to the south-east Wicklow area.

The Minister may say in his reply that he will probably be in Wicklow in the next few weeks opening a small new industry there, Servier Limited, and that is welcome. Had we been able to maintain employment and expand employment in traditional industries there, we would have welcomed Servier but they do not in any way replace the huge losses in employment, most of it male employment, in the area. As a result of unemployment we have experienced an unusually high level of emigration in a time of bad emigration. School leavers have no hope of gaining employment in the area. School leavers who cannot get into universities have a very bleak future indeed. Local industry, be it traditional industry like fisheries or the shipping industry in the area, can provide only a very small number of jobs in any one year.

I would be grateful if the Deputy would now bring his remarks to a close.

I hope that in the short time available to me I have underlined the very serious black spot of unemployment in one area of the country and I hope the Minister, given this advance warning, can use the time to take action so that the big companies who decide to——

I must now call the Minister.

——close down can be stopped in their tracks.

I am at present considering a proposal under the Mergers, Take-Overs and Monopolies Act, 1978, which involves the takeover of Ergas by Flogas. I might say at this stage that I am somewhat surprised that an announcement was made publicly by the acquiring company to the effect that they had acquired the purchased company without any clearance having been obtained from me. This is very unusual and not the normal practice in commercial activity. I am aware they made it clear that it was subject to Government approval but nonetheless it is unusual that they should have acted as they did and I will be inquiring as to why they acted in that way.

I am aware that under this proposal it is envisaged that the existing facility in Arklow will be closed. I understand the concerns expressed by Deputy Kavanagh and others about the employment implications of the proposal and will take account of what Deputy Kavanagh has said here tonight before coming to a decision on the matter.

As the House will be aware, merger control in Ireland is governed by the Mergers, Take-overs and Monopolies (Control) Acts, 1978 and 1987. The legislation sets out to control take-overs and mergers involving any two or more enterprises. The Act applies to every proposed merger or take-over where the value of the assets or the annual turnover of each of two or more of the enterprises involved is not less than £5 million in terms of value of the assets or £10 million in terms of the turnover and that apparently applies here.

A merger or take-over is defined as being taken to exist when two or more enterprises, at least one of which carries on business in the State, come under common control. Where a merger or take-over is proposed which falls within the scope of the Act, notification of the proposal to the Minister for Industry and Commerce is obligatory. A merger or take-over cannot be concluded until the Minister has stated that he does not propose to prohibit it either absolutely or conditionally, or in the absence of such a statement until a period of three months has elapsed from the date of notification or from the date of receipt of such further information as the Minister may require.

Under the 1978 Act there are a number of criteria which are taken account of in reaching a decision. In addition to employment, which is an important one, the other significant criteria are the effect on competition; continuity of supplies; the extent to which a proposal is in harmony with Government policy relating to the rationalisation, in the interests of greater efficiency, of operations in the business concerned and any benefits likely to be derived from the proposal in areas such as efficient distribution.

The market for the Ergas product is very competitive because of the possibility of customers switching to alternative energy sources. I understand that this intense level of competition is what prompted the current owners of the company to sell.

Given the availability of alternative fuels I do not see that there will be adverse implications arising in the area of competition from the proposal, nor is there any real threat to continuity of supplies.

If an industry requires rationalisation and this is brought about as a result of free competition that is not unfair it is not the job of Government to interfere. In this case I have no evidence to suggest that the competitive forces at work are anything other than fair.

I am very conscious of the employment difficulties in the Arklow area particularly during the eighties and I would like to emphasise to the House that the IDA have earmarked Arklow as a priority area for industrial development. Indeed, it is encouraging to note from a recent employment survey that the earlier job loss trends in Arklow are now beginning to be reversed and that the trend now shows a small but welcome increase in employment in the area. I am confident that the IDA's continued efforts to promote industrial development in Arklow will show significant and tangible results in the not too distant future when I expect some worthwhile announcements to be made.

As I have indicated at the outset, I am currently considering the proposal involving the take-over of Ergas. I would like to reassure Deputy Kavanagh and the House that in taking my decision I will give the proposal a rigorous examination under the Mergers, Take-overs and Monopolies Act.

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