Merrill settles out of court with Co-op for £40m

Click to follow
The Independent Online

Merrill Lynch Investment Managers yesterday made an out-of-court settlement, estimated at around £40m, to end a year-long dispute with the Co-operative Group over the management of its £2bn pension fund.

Merrill Lynch Investment Managers yesterday made an out-of-court settlement, estimated at around £40m, to end a year-long dispute with the Co-operative Group over the management of its £2bn pension fund.

It is the third major payment MLIM has made in the last 18 months after striking deals with the consumer goods firm Unilever and the supermarket chain J Sainsbury to settle similar disputes over the management of their pension funds.

Neither MLIM nor the Co-operative Group would reveal the precise details of the clash or the financial terms of the settlement. Industry sources hinted, however, that MLIM had paid the Co-operative Group in the region of £40m. It is said to have made a £70m out-of-court settlement to Unilever.

The spat with the Co-operative Group relates to the performance of its £2bn pension fund, of which MLIM managed around £500m, in 1997 and 1998.

While MLIM, formerly Mercury Asset Management, increased the value of the fund over that period, the Co-operative Group cited poor performance and staff defections when it fired MLIM last May after a 30-year stretch.

Nick Eyre, Co-operative Group secretary and a trustee of its pension fund, insisted the dispute had been resolved "amicably" and said the firm would be resuming its business relationship with MLIM.

As part of the deal, MLIM has been re-hired by the Co-operative Group to look after a slug of its pension fund, although the figure is well beneath the £500m it previously managed and was described, by one source, as "minimal".

A spokesman for MLIM said: "We have resolved all past issues with the Co-op on an amicable basis and are pleased to have resumed our business relationship."

After carrying out a review of the management of its pension fund, the Co-operative Group has increased the number of investment managers to eight from six, firing the fund management firm Morley in the process. The settlement comes nine months after MLIM settled a similar dispute with J Sainsbury, which had been seeking redress for the management of its £1.5bn fund, although neither party would comment on the size of the payout.

It also follows a high-profile court battle with Unilever, which sued Merrill because it underperformed its benchmark by 10.5 per cent between January 1997 and March 1998, despite contract which stipulated performance targets of only undershooting by 2 per cent.

Comments