Trustees warn Morrisons pension schemes could be weakened by takeover

It comes five days after Morrisons’ board said it agreed a £7 billion takeover by US private equity firm Clayton, Dubilier & Rice.

Henry Saker-Clark
Tuesday 24 August 2021 16:26
Pension scheme trustees for Morrisons have raised concerns over the potential impact of a takeover (PA)
Pension scheme trustees for Morrisons have raised concerns over the potential impact of a takeover (PA)

A takeover of Morrisons by either of its two leading suitors could “materially weaken” the security of its pension schemes, trustees have warned.

It comes five days after Morrisons’ board said it agreed a £7 billion takeover by US private equity firm Clayton Dubilier & Rice (CD&R).

The offer usurped a previously agreed £6.7 billion deal with a consortium led by private equity rival Fortress.

New-York based Fortress is currently assessing whether or not to make a further offer.

We hope agreement can be reached as soon as possible on an additional security package that provides protection for members' benefits

Steve Southern, pension scheme chair of trustees

On Tuesday, trustees from the Morrison’s Retirement Saver Plan and the Safeway Pension Scheme raised concerns that savings tied to the listed supermarket business could be impacted by a takeover by either firm, unless more assurances are provided.

The trustees said they believed current support could be weakened by a private equity buyer, for example by a takeover which would secure additional debt on the retailer’s assets, the related increased debt service burden and any potential refinancing and restructuring.

In a statement, the pension scheme trustees said they started discussions with Fortress over their concerns and had an introductory meeting with CD&R representatives last week.

Steve Southern, chair of trustees for the scheme, said: “An offer for Morrisons structured along the lines of the current offers would, if successful, materially weaken the existing sponsor covenant supporting the pension schemes, unless appropriate additional support for the schemes is provided.

“We hope agreement can be reached as soon as possible on an additional security package that provides protection for members’ benefits.”

In a statement, Morrisons said: “Morrisons is supportive of the parties reaching an agreement which protects and supports the pension schemes in an appropriate manner, and will continue to work with all parties to achieve this as soon as possible.”

A spokesman for The Pensions Regulator said: “In our role to protect savers, we are working closely with the trustees of the Morrisons pension schemes and we note they are taking a robust position in terms of securing the best outcome for members in relation to the proposed transaction.

“This is in line with our expectation that trustees act as the first line of defence for members.”

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