Shareholders in health and beauty giant Alliance Boots overwhelmingly approved the company's £11bn private equity takeover yesterday, but the board ran into protests over its failure to reach a deal on the funding of staff pensions.
John Watson, chairman of trustees for the Alliance Boots pensions scheme, raised his concerns at a gathering of shareholders to back the takeover by deputy chairman Stefano Pessina and buy-out group Kohlberg Kravis Roberts.
The scheme's trustees have already intimated that a current review of the scheme will show a £305m deficit, and members fear the £8bn of debt KKR is taking on to finance the deal will jeopardise its funding position. The trustees are said to be demanding £400m paid in cash immediately, with additional payments potentially totalling up to £1bn.
The trustees have no power to veto a deal, but if an agreement is not reached it will be the first time that a FTSE-100 company will be taken over without the approval of its pension fund trustees.
Watson told the meeting: "I am disappointed that the board agreed to recommend this offer before an agreement on pensions had been reached. We have made it clear that the borrowings taken on to finance the acquisition will affect the scheme. We still have not reached an agreement. What will the board specifically do to give the scheme members the support they deserve?"
The Alliance Boots pension fund has 66,000 members, including 16,000 employees who are still making contributions.
Chairman Sir Nigel Rudd responded: "The fact of the matter is that the Boots pension fund is one of the best-run and best-funded schemes in the FTSE-100 index. I can assure you that for the next few weeks we will be urging KKR and Stefano Pessina to come to some arrangement."
If no agreement is reached, said Rudd, the Pensions Regulator will become involved.
Some 96% of Alliance Boots shareholders voted in favour of the takeover.
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