Chapelthorpe uses pension hole to fight sell-off

Chapelthorpe, the car fabric to umbrella frame maker, warned yesterday that its pension liabilities could soar to £30m if an attempt by two rebel shareholders to break up the group goes ahead.

Chapelthorpe, the car fabric to umbrella frame maker, warned yesterday that its pension liabilities could soar to £30m if an attempt by two rebel shareholders to break up the group goes ahead.

Investment funds controlled by Progressive Asset Management and JO Hambro Capital, which own 10.8 per cent of Chapelthorpe, have called for an extraordinary general meeting with the aim of ousting two-thirds of the board and installing their own team. If successful, they want to sell off the company's divisions and return cash to shareholders.

But Chapelthorpe, which issued a profits warning earlier this month, said that breaking up the group could threaten the savings of the 2,000 existing and past employees who belong to its pension scheme.

Under new legislation due to come into force in April that is aimed at giving pension scheme members more protection, breaking up the group could trigger an additional £30m of pension liabilities, the group said. Its current pension deficit is £2.4m.

John Standen, the chairman, said the company had received actuarial and legal advice that it could cost up to £30m to buy an annuity for each pension scheme member. "These additional potential pension liabilities could significantly reduce the cash returned to shareholders under the requisitionists' proposals and it is not clear if [they] have considered the impact of this in their proposed break-up strategy," Mr Standen said.

"I must emphasis that potential additional liabilities such as these become immediately payable under a break-up strategy, but do not with the continued running of the group," he added in a letter to shareholders.

Mr Standen would be one of four directors that the rebels would oust. Yesterday he said he felt "fairly confident" that the group's other shareholders, would back the current board.