UK - Neither the trustees of Sainsbury's two pension schemes nor the Pensions Regulator would have the "power" to force a private equity bidder to pay the £3bn needed to plug the supermarket giant's pension deficit, claimed an independent consultant.
John Ralfe, who made his comments through RBC Capital Markets’ Open Forum Notes, claimed that under rule 35 of Sainsbury’s Deed and Rules, the company – and not the trustees as was the case when Permira approached WHSmith in 2004 – sets the contribution rate.
Likewise, Ralfe warned “we should not overstate the powers of the Pensions Regulator”, which would only be able to enforce payment of contributions up to a maximum of the latest IAS19 deficit, which currently stands at £477m.
Ralfe said: “The Trustees must be seen to take a robustly consistent line to protect the interests of their 86,000 members if any bid becomes recommended, or if the company decides to increase its gearing.”
A consortium of investors, led by private equity player CVC, has been given the deadline of April 13 to make a formal offer for the company.
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