good
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COMMERCIAL-IN-CONFIDENCE
CONFIDENTIAL AND MARKET SENSITIVE
Mr Funn
Mr St
glance.
25
Ps
Copy No:
Mutty lak
Eckel
2715
To:
SECRETARY OF STATE FOR TRADE AND INDUSTRY
From:
GORDON BORRIE
DIRECTOR GENERAL OF FAIR TRADING
20 May 1992
PROPOSED ACQUISITION OF MIDLAND BANK PLC ("MIDLAND") BY LLOYDS BANK PLC ("LLOYDS") OR BY THE HONG KONG AND SHANGHAI BANKING CORPORATION ("HSBC")
In this submission I advise under section 76 of the Fair Trading Act (the Act) on the proposed bid for Midland by Lloyds. I also advise on the argument for invoking Article 21(3) of the European Community Merger Regulation (ECMR) in relation to HSBC's bid for Midland.
SUMMARY
2
I recommend that in view of the serious concerns raised by the Lloyds bid on competition grounds - in particular in the market for lending to small businesses you should refer the case to the Monopolies and Mergers Commission (MMC) for further examination. In advising you, I have carefully considered certain proposals for divestment in lieu of reference which Lloyds has made. I do not consider these divestment proposals are an adequate remedy for the concerns which arise or that they are a satisfactory alternative to a full and thorough study of the issues by the MMC.
3 I also recommend, in respect of HSBC's bid, that you do not seek an exit to UK jurisdiction under Article 21 of the ECMR. I am not persuaded that there is any case for doing So - on prudential grounds, or on arguments about the "Hong Kong factor", or on grounds of "evenhandedness" of regulatory treatment.
TIMING
4 In view of the high degree of public interest in both bids for Midland, I think you should announce your decisions as soon as practicable. There is no statutory or City Code deadline for Lloyds but I understand that Sir Leon Brittan in expected to announce his decision on the HSBC bid on Thursday 21 May (he must do so by 26 May at the latest).
CONFIDENTIAL AND MARKET SENSITIVE
1
COMMERCIAL-IN-CONFIDENCE
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