Morrisons frontrunner reaches agreement with pension trustees

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The current favourite to win the race to take over supermarket chain Morrisons has said it has reached agreement with pension trustees.

Clayton, Dubilier & Rice (CD&R) is in pole position with a £7bn deal with a final decision expected within weeks.

But trustees of the pension schemes had expressed concern about the protections in place should Morrisons face a crisis in the future.

The Morrisons Retirement Saver Plan and the Safeway Pension Scheme have more than 85,000 members and are closed to new members.

Sir Terry Leahy, former Tesco chief executive and a senior adviser to CD&R, said: “We thank the Trustees for their constructive engagement, and the positive outcome underscores CD&R’s approach as a responsible investor and emphasises the respectful approach CD&R would take to its wider stakeholder responsibilities and commitments.”

CD&R and the trustees have agreed “a comprehensive package of measures” to protect members’ benefits and to support the schemes’ ambitions to “buy out”.

The two pension funds are in surplus but can’t afford to buy annuities for all of their members. The schemes are therefore currently reliant on Morrisons for support, but believe they can stand alone within a decade.

Steve Southern, chairman of the Trustees, said: “We are pleased with the progress made and CD&R’s ability to provide the necessary support and reassurance to the Schemes.

“CD&R has been proactive in its engagement with the Trustees, with discussions progressing positively and decisively, delivering a positive outcome for all members of Morrisons’ pension schemes.”

The agreements include more properties to be contributed as additional security to the existing pension funding partnership structure, top up and release mechanisms put in place, and enhanced governance provisions.

Last week Morrisons set an October deadline for rival bidders CD&R and Fortress to submit final bids.

The CD&R bid is priced at 285p-per-share although Morrisons’ share price has been around 291p since that offer was accepted as investors speculate the bidding war may still continue. CD&R’s current bid is worth £1.3bn more than its first bid earlier this summer, which had been at 230p-per-share.

A shareholders’ meeting will be held in, or close to, the week of October 18. By then Morrisons intends to have received final offers, potentially through an auction procedure, and the retailer’s board will then recommend an offer to shareholders.

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