Whitbread has pledged to use proceeds from its proposed £3.9bn sale of Costa Coffee to Coca-Cola to make an additional contribution to its defined benefit (DB) scheme.
The amount of the contribution to the Whitbread Group Pension Fund is yet to be agreed, while Coca-Cola will see "no material funding obligation" as just a handful of Costa employees are members of the DB scheme.
The proposed sale, which is due to complete in the first half of 2019, comes after Whitbread had previously mulled demerging Costa Coffee from the wider business.
Whitbread chief executive Alison Brittain said pensioners and other stakeholders would "have the opportunity to share in the benefits".
"The announcement today represents a substantial premium to the value that would have been created through the demerger of the business, and we expect to return a significant majority of net proceeds to shareholders," she continued. "Whitbread will also reduce debt and make a contribution to the pension fund, which will provide additional headroom for the expansion of Premier Inn."
Trustee chairman Keith Jones said the exact size of the contribution had not yet been discussed in detail but that the company "recognises the need for a fair share of the proceeds to be made to the scheme".
"We congratulate the company on the proposed Costa sale," he continued. "We have a good relationship with the company and expect to agree terms to further improve the position of the DB pension scheme over the next few months".
As of 1 March, the nearly 38,000-member scheme had an IAS 19 deficit of £289m, with liabilities and assets amounting to £2.7bn and £2.4bn respectively. The scheme closed to future accrual in 2009.
Under the scheme's 31 March 2017 triennial valuation, the company had also agreed to make cash contributions of £85m per year between 2018 and 2022, with a final contribution of £57m in the 2022/23 financial year.
It had also agreed a dividend-sharing mechanism, whereby deficit recovery contributions would increase at the same rate as dividends, less 5%, where dividends increased by more than 5% in a year. DB schemes and sponsors are facing increasing pressure from The Pensions Regulator to adopt such mechanisms.
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