The Takeover Panel has been approached with proposals which regard pensions schemes this week that would aim to give pensioners the same rights as existing employees to be notified of a bidder’s plans, including the right for their representatives to receive copies of regulated offer documents.
Private Equity led bids are particularly relevant to these proposals as they can, and often do, fundamentally alter the target’s capital structure by loading the balance sheet with debt. This could have a compromising impact on the ability to meet the company’s long term pension obligations.
If these proposals were to come into force, it will mean that when a company makes a takeover bid it will have to be clear about what their offer will entail for their target company’s pension plans – a topic which has in recent years proved to be rather tricky.
However, the proposals on pensions do stop short of giving the pensioners a say on whether a takeover will go ahead. Furthermore, the bidders will not have to make firm commitment on how the pension fund would actually be funded if the bid is successful. What is does mean is that there will be an opportunity for debate over the takeover impact on the pensions. This is a net result of several complaints saying that they were the last to know by retirement plan trustees.
There have been a few high profile attempted bids that have had issues with pensions schemes is the last few years. Firstly, Philip Green’s 2004 bid for Marks and Spencers was largely scuppered as a result of the lack of clarity surrounding the deficit in M&S’s pension fund. Secondly, was the failed Qatari-backed bid for Sainsbury’s on the grounds of concern over the arrangements for the future funding of pension commitments.
This is not a new proposal. Pension groups began lobbying for the same measure last year and very much welcome it’s planned introduction.