CONFIDENTIAL COMMERCIAL IN CONFIDENCE
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GNE
MARKET SENSITIVE
(126)
Many 102/2
PS/Mr Goodlad
HSBC/MIDLAND/LLOYDS
FROM: R A Burns
DATE: 21 May 1992
CC:
My stor
Mis
PS
PS/Mr Patten PS/Mr Garel-Jones PS/PUS
Sir J Coles
Mr Crowe
Mr Bone
Mr Jay
Heads: ECD(I), ERD, Economic Advisers, FED, HKD, News Dept
1. I attach a copy of the advice to the Secretary of State for Trade and Industry from the Director General of Fair Trading. Sir Gordon Borrie recommends:
a) that the Lloyds bid for Midland should be referred to the Monopolies and Mergers Commission on competition grounds; and
b) that an exit to UK jurisdiction under Article 21 of the European Community Merger Regulation should not be sought for the HSBC bid.
We
2. This is a very satisfactory outcome of our recent efforts. Providing that Mr Heseltine agrees with the advice of Sir Gordon Borrie, we will have succeeded in ensuring that the HSBC bid for Midland does not fail on regulatory grounds. should therefore have avoided the risk that the attitude of the British authorities could be seen as a vote of no confidence in Hong Kong. Sir Gordon Borrie's advice is essentially that the two bids should be looked at separately under the two different European and national arrangements, and that the final decision on which bid to accept should be left to the shareholders.
3. We have throughout sought to keep the Chinese carefully informed. They have continued to express some concern about any proposal to move the mind and management of the Hong Kong and Shanghai Bank out of Hong Kong. Mr Purves seems to have succeeded in persuading the Bank of England that he does not need to leave Hong Kong until towards the end of 1993 when he will be leaving anyway, although he will be making various arrangements to install key parts of his management here in London before then. The Chinese have asked to talk about this issue privately with the Government of Hong Kong. They have so far responded in a restrained and sensible fashion, and there must be a reasonable prospect of that continuing to
EM3ABT CONFIDENTIAL: COMMERCIAL IN CONFIDENCE:MARKET SENSITIVE