Trustees and transactions

More evidence of trustees asserting themselves more in the M&A market. Today's FT reports on the trustees of the ICI pension scheme (coincidentally one of the first big DB schemes to close to new members, even before the TMT-inspired market blow-out) insisting on a central role in ICI talks with Akzo Nobel.

Here's an excerpt from the FT article -

A spokesman for ICI’s pension trustees said: “We would have expected to have an early and direct conversation with anyone wanting to replace ICI as owner of the company.”

He highlighted the power of the trustees to determine the size of the deficit, which could range from £500m up to £2.2bn, depending on their view of a bidders’ financial strength and their confidence in the bidders’ willingness to fund long-term promises to pensioners.

The scheme’s liabilities are more than £9.2bn, against a market capitalisation of £6.5bn, according to the company.

He said: “If faced with someone who hasn’t talked with us, we would have to form a different, harsher view [of the owner]. That would be another factor in determining the size of the deficit.

“We are agnostic about who owns ICI, but not about the strength of the promise.

“If we perceive the promise [of whoever sponsors the pension scheme] is legally and financially weaker, that would increase the size of the deficit. It would be better to have an up-front conversation.”

Separately it looks like the trustees of the Boots pension fund have finally got KKR to play ball. This bit from The Observer yesterday.