Hogg Robinson float faces pension hole hurdle

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Hogg Robinson, the business travel agency, may be forced to raise additional capital to plug its £150m pension deficit, if its pushes ahead with a proposed £700m flotation.

The company, taken private in a management buyout backed by Permira six years ago, admitted yesterday that a return to market was its most likely option, after finally dissolving its joint venture with BCD, the Dutch travel and financial services group, this week.

But according to the group's most recent accounts posted at Companies House, it has a final-salary pension scheme deficit of more than £150m, which has increased by about 25 per cent over the past year.

Under rules introduced by the Pensions Regulator last year, trustees would be within their rights to demand a proportion of any capital raised at flotation, to provide stability for the company scheme. Hogg Robinson declined to comment on plans for its pensions liabilities.

But David Radcliffe, the chief executive, admitted a flotation was now more likely than a trade sale. "There is compelling logic that now is certainly the right time to return to the market but it is one of the options," he said.

"We haven't appointed advisers yet but we are looking at doing so. Our thinking is advanced and I would say it is a matter of months." Mr Radcliffe added that he believed the company would prove popular with investors at flotation, mainly because of its position as a service provider to many corporate clients.

"Clearly, what we provide is very different from the role of an old-fashioned travel agent. I am told we tick all the right boxes [for a float]," he said.

Hogg Robinson was founded in 1845 by two brothers-in-law - Augustus Robinson, an insurance broker, and Francis Hogg, a wine merchant. It was not until 100 years later that the company launched into business travel services, for which it is best known.

In the year to 31 March 2005, the group made pre-tax profits of about £45m. Meanwhile, Mr Radcliffe's remuneration package for the year exceeded £1m - high for a company of Hogg Robinson's size.

The travel agency's directors are expected to become multimillionaires if the company floats.