Following a request by the UK Takeover Panel, Sainsbury’s trustees have clarified the size of the retailer’s pension deficit, which currently totals GBP410m (US$804.24m).
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In a statement issued late on Friday (23 March) the trustees said that this could rise to as much as GBP1bn if there were to be a change of circumstances, such as a private equity bid that might require a move to “more conservative” investment policies.
Sainsbury’s shares have dramatically increased in value since a private equity consortium consisting of CVC, Kohlberg Kravis Roberts (KKR), Blackstone and Texas Pacific Group, first signalled its interest in the UK’s third largest retailer at the beginning of February. However, the size of the retailer’s pension deficit has been viewed as a potential stumbling block for any takeover move. Shares were marginally down today (26 March), slipping 0.18% to 548.5 pence at time of press.
It is believed that Sainsbury’s pension trustees will begin talks with the CVC-led consortium stalking the chain. In a statement to the London stock exchange, the trustees said that while they currently enjoy a “strong and secure covenant” with the retailer, a private equity takeover “would naturally have implications for the trustees’ approach to security, the funding position and the appetite for risk”.
The Sainsbury’s trustees are pivotal to any takeover bid, as the Pensions Regulator can effectively sink any acquisition believed to threaten members’ benefits by demanding an upfront payment.
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