Uniq abandons bid talks due to pension worries
UK food company Uniq has terminated bid talks with a private equity player over fears that a highly leveraged takeover would jeopardize the company's pension fund. The company said the main reason for terminating talks was "the leveraged nature of the potential bidder's proposed capital structure and its impact on the pension position."
The trustees reportedly feared that being taken over by a heavily borrowed bid vehicle would mean that, in the case of insolvency, the pension fund members would lose their pensions.
"The company has concluded that the latest proposal from the remaining party did not provide an acceptable basis for the company and the pension trustee to continue discussions," the company said.
Uniq's pension fund has a deficit of £102.3 million ($196.5 million). The company has said that from next month it will start increasing contributions from £8.4 million to £15 million per annum.
Another deal that was stalled by pension trustee anxiety was European private equity firm Permira's aborted £940 million takeover of UK retailer WH Smith in June 2004. WH Smith's pension fund trustees demanded Permira pay at least £100 million to plug the company's pension deficit, valued at between £200 and £250 million.