Pension ‘poison pill’ may derail Boots sale
Pension fund at Boots could act as a ‘poison pill’ derailing US owner’s plans to fire high street pharmacy
The Boots pension fund could act as a ‘poison pill’ derailing the US owner’s plans to relieve the major drugstore chain.
As revealed in The Mail on Sunday last week, healthcare giant Walgreens Boots Alliance (WBA) hopes to separate its international operations as soon as possible. Boots and other operations in Europe are seen as a ‘distraction’ from core US operations, according to industry sources.
However, WBA is said to have agreed a guarantee worth billions of pounds for the trustees of the Boots pension scheme.
Key: WBA bosses Ornella Barra and husband Stefano Pessina at a masquerade ball
It wants any buyer to assume this obligation to pension fund participants, but analysts say it will likely prove a major stumbling block in a sale.
The pension guarantee is believed to have been a factor in the failure of Walgreens’ attempt last year to find a buyer willing to meet the £7bn asking price. “Walgreens has cornered itself by providing a pension guarantee,” said an industry expert. The last thing it wants is to sell Boots and still have to pay a hefty pension obligation. It’s a huge poison pill.’
Stefano Pessina, 81, executive chairman and the company’s largest individual shareholder, 69, chief of operations for the international division) would support a sale but would be in no rush to close a deal.
Boots’ retirement plan is believed to be well funded. A recent shortfall of around £120m would have been cleared. But the pension scheme also matters, because it can be greater than the price that Boots itself can afford. That complicates a divestment without a guarantee from the parent company for the scheme, and could deter potential private equity buyers, sources added.
Strategy: Roz Brewer, CEO of WBA
It is not uncommon for a defined benefit plan that promises to pay a pension based on an employee’s final salary to have a parent company guarantee.
If the ownership of a company changes, the position of a pension scheme and its participants must be protected by law against any adverse consequences.
Arrangements to protect participants normally involve an agreement between the current owner, the prospective owner and the trustees of the plan.
Investors and directors want WBA — whose CEO is Roz Brewer, 61 — to focus on a new strategy that includes seeing the U.S. pharmacy chain, the second-largest in that country, move away from traditional retail and instead focus more focuses on private healthcare. market.Boots was one of the first pension plans to move from stocks to bonds to match its liabilities – the promise to pay future pensions – to its assets.
WBA declined to comment.