On the go: Supermarket chain Morrisons has prevailed in the bidding war for troubled retailer McColl’s, beating a rival bid from EG Group. The acquisition will reportedly uphold all promises made to McColl’s pension schemes.
The trustees of the two McColl’s pension schemes — the TM Group Pension Scheme and the TM Pension plan, which have more than 2,000 members between them — issued a flurry of correspondence over the weekend, both to potential bidders and to business secretary Kwasi Kwarteng, seeking assurances that members’ benefits would be protected and that the company would not sever ties with the pension schemes.
In a statement issued on May 6, the trustees said: “The pension schemes are significant stakeholders in the company, and the trustees call on all potential bidders to make clear that they will respect the pension promises made to the 2,000 members by McColl’s and its subsidiaries, and will not seek to break the link between the schemes and the company.
“The two pension schemes are relatively small compared with the McColl’s business, and funding them would clearly be manageable for the ongoing business, or for anyone who acquires it.”
They continued: “Breaking the link between the schemes and the sponsor company, by way of a pre-pack administration, would represent a serious breach of the pension promises made to staff who have served the business loyally over many years, and risks causing the schemes to enter the Pension Protection Fund with a resulting reduction in benefits.”
Fears for the future of the pension schemes came as The Telegraph reported on May 7 that the owners of EG Group could opt for an acquisition through a pre-pack administration process that would have allowed the owners to avoid paying creditors and to cut ties with the schemes, though Pensions Expert understands this was not the route eventually chosen.
EG Group reportedly planned to take full responsibility for the pension schemes in an effort to match Morrisons’ bid, as well as to raise the wages of the lowest-paid McColl’s staff to the broader EG Group rate of £10.05 an hour.
EG Group’s plans are now irrelevant, however, as Morrisons has emerged victorious in its own pre-pack administration bid, albeit with promises that McColl’s stores and staff preserved in their entirety, as reported by Sky News on May 9.
The deal will reportedly see all existing pension promises honoured.
The TMGPS is fully funded on a statutory ongoing funding basis, while the TMPP is expected to attain the same status next year, ending the £1.75mn annual deficit recovery contributions.
A Pension Protection Fund spokesperson said: “We welcome the news that, under the sale agreement, Morrisons will take responsibility for both of McColl’s defined benefit pension schemes. We hope this deal will provide clarity to scheme members after what must have been an unsettling time."
EG Group declined to comment on this story. Morrisons has been approached for comment.
