A takeover of Morrisons could “materially weaken” the security of its pensions schemes if additional protections are not implemented, according to the trustees of the schemes.
The comment comes as part of a statement released from The Morrisons Retirement Saver Plan and The Safeway Pension Scheme, which represents over 85,000 members, in response to the news that the supermarket chain has accepted a £7bn takeover offer from US private equity firm CD&R.
It warned that if no agreement is reached to provide additional protection for the pensions schemes, the scheme could be weakened by several factors, including the introduction of additional debt secured with a priority claim ahead of the schemes on the majority of the Morrisons group assets, the related increased debt service burden and potential future corporate activity, including the potential for refinancing and restructuring.
The trustees added that they had been in discussions with rival firm Fortress following the acceptance of their previous offer since 3 July about additional protections and have since begun “helpful” introductory meetings with CD&R following the acceptance of its latest offer on 19 August.
Steve Southern, chair of Trustees for the Morrisons Retirement Saver Plan and the Safeway Pension Scheme said: “An offer for Morrisons structured along the lines of the current offers would, if successful, materially weaken the existing sponsor covenant supporting the pension schemes, unless appropriate additional support for the schemes is provided.
“We hope agreement can be reached as soon as possible on an additional security package that provides protection for members’ benefits.”
In a statement, the big four grocer revealed it had accepted the deal which values the business at 285p per share, an increase of 13p per Morrisons Share and £332m total offer value on the terms of the rival Fortress offer.
Morrisons directors said they intend to “recommend unanimously” that Morrisons shareholders vote in favour of the deal at a general meeting which is expected to take place in or around the week commencing 4 October 2021.