The trustees of Morrisons’ pensions schemes have publicly raises concerns about the grocer’s decision to back the new £7bn takeover bid by private equity giant Clayton, Dubilier & Rice.
The trustees, who represent 85,500 members of the pensions schemes, said the new 285p-per-share bid threatens to “materially weaken” their financial position. In a letter, they raised concerns about being outranked by lenders behind the new bid, in case Morrisons ever runs into financial trouble. They also raised concerns about the cost of servicing the debt CD&R will take on to fund the takeover.
Steve Southern, the chair of trustees for the Morrisons Retirement Saver Plan and the Safeway Pension Scheme, called on more protections to be put in place before shareholders vote on the deal. He noted: “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”.
Both the pension funds are currently in surplus, but they do not have enough money to buy annuities for the members, as that cost is now estimated to be £800m on a windup basis. The current funding arrangements would allow them to complete this task within a decade, but if Morrisons were to go under, the pensions would become an unsecured creditor.
In a statement, CD&R said that the pension rights of all of Morrisons’ management team and employees would be “fully safeguarded”. It described an initial meeting with the trustees as a “positive discussion”, adding that it “looks forward to further positive engagement with the trustees and to providing the appropriate support to the schemes and its members.”
