Trustees of the Alliance Boots pension scheme were last night edging closer to a deal with the American private equity firm Kohlberg Kravis Roberts to settle their £1 billion funding dispute, as a deadline for taking legal action to block the takeover drew closer.

With just 24 hours to go, the two sides were locked in talks yesterday. Sources said they were close to agreeing a way to secure the fund, which has more than 66,000 members and is £305 million in deficit. The trustees have threatened legal action to block KKR’s £11.1 billion takeover of the health and beauty group if a deal cannot be struck.

They would have to file papers with the court by tomorrow to give the judge time to consider their representation before a hearing on June 21 to approve the takeover.

KKR, which is financing the deal with more than £8 billion of debt, is understood to have proposed setting up an emergency fund of £600 million, then paying £340 million into the scheme over a decade. The trustees want a higher upfront payment and a clearer timetable for staged payments. Meanwhile, Terry Rooney, chairman of the Work and Pensions Select Committee, has summoned David Norgrove and Tony Hobman, the Pensions Regulator’s chairman and chief executive, for private talks on whether they are making good use of their powers, or need more.

“When you have a buyout that is highly leveraged and massively indebted, then all the earnings are going on servicing that debt and there is nothing left for the pension fund,” he said. “In the case of Alliance Boots, it is very worrying.”

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts