The takeover offers for Morrisons could “potentially weaken” the security of the supermarket’s pension schemes if no additional protections are offered, according to its trustees.
In a letter published on Tuesday (24 August), the trustees of the retailer’s two pension schemes said that whilst the plans were both currently in surplus, they remained dependent on the backing of Morrisons.
The trustees warned the backing could be weakened by a new owner, for example if a private equity buyer was to secure additional debt on the supermarket’s assets, increased debt service burden or any possible financing and restructuring.
Morrisons’ retirement saver plan and the safeway pension scheme chair of trustees, Steve Southern 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.”
The grocery chain is at the centre of a bidding war between two competing investment firms, the Softbank owned Fortress, and Clayton, Dubilier & Rice (CD&R).
Last Thursday night CD&R trumped Fortress by tabling a 285p-per-share offer worth £7bn for the supermarket chain.
Fortress has urged Morrisons shareholders to “take no action” to the improved CD&R bid while it considers its options.
Continue to work with all parties
In response, Morrisons said it places “significant emphasis on the wider responsibilities of ownership of the Morrisons business and recognises that the Morrisons Retirement Saver Plan and the Safeway Pension Scheme are a major part of that. Morrisons has a long-established pension strategy, which has been agreed with the trustees, a key aim of which is to ensure that the security of members’ benefits in the pension schemes is appropriately protected.
“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.”
CD&R said that if its takeover was successful the pension rights of all of Morrisons’ management team and employees would be “fully safeguarded”. It described its first meeting with the pension trustees as a “positive discussion” and accepted that they would want to discuss providing additional security to the schemes through an appropriate mitigation package.
“Given their position as an important stakeholder in Morrisons, CD&R looks forward to further positive engagement with the trustees and to providing the appropriate support to the schemes and its members,” it said.
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