UK - Gaping pension fund deficits at 10 leading firms will deter potential buyers, Lane Clark & Peacock warns.
Its annual survey of the FTSE100 warns that while the aggregate deficit has fallen from £55bn to £42bn, the shortfalls at top companies still pose corporate risk.
LCP said that 10 firms – BAE Systems, British Airways, BT, Cable & Wireless, GKN, ICI, Rolls-Royce Group, Royal & SunAlliance, J Sainsbury and Whitbread – have deficits equivalent to 25% or more of their entire stock market value.
LCP warned that such large deficits may act as deterrents to potential purchasers and make the firms “immune from acquisition”.
The report said: “This is in marked contrast to the 1980s when some companies became targets purely for their surpluses within their pension schemes.”
LCP said the experience of WHSmith, which saw private equity group Permira scrap plans to buy the bookseller and stationer because of a £250m deficit, was indicative of pension issues increasingly influencing corporate activity.
The report found that FTSE100 companies had, on average, doubled the contribution to their defined benefit scheme compared to the previous year.
But there was a “wide variation” between company contributions. Rentokil Initial made no contributions in 2003 – despite an FRS17 deficit of more than 20% at the beginning of the period – whereas others “significantly increased” payments.
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