A growing row over the Alliance Boots pension fund is set to be scrutinised by MPs, The Times has learnt.

Terry Rooney, MP for Bradford North and chairman of the Commons Work and Pensions Select Committee, is understood to be concerned about the position of the fund, which has 66,710 members and a £305 million deficit.

The scheme has become a key sticking point in the £11 billion takeover of the health and beauty group by Kohlberg Kravis Roberts (KKR), the US private equity firm, and Stefano Pessina, the group’s executive deputy chairman.

Mr Rooney is planning to hold talks with fellow committee members next week when Parliament resumes.

The move comes as Alliance Boots shareholders are expected to approve the takeover this morning, despite no agreement having been reached with trustees of the fund over how much extra the consortium should pay into it.

Although Boots’ pension trustees do not have the power to block the sale, their opposition would be embarrassing at a time of increased scrutiny of private equity buyers of British businesses.

The sale of Boots is the largest such deal to date. At today’s extraordinary general meeting, the Alliance Boots board is expected to face awkward questions on the issue. John Watson, chairman of the pension fund trustees, is planning to attend in order to “make his views clear”.

The trustees of the Alliance Boots scheme had been wrangling for weeks with the private equity-backed bidders over their potential contribution to the company’s £3.5 billion pension fund.

While some progress is said to have been made, at one stage last month KKR was understood to be offering an immediate cash injection of just £50 million, while the trustees were seeking £400 million.

The trustees are understood to have passed on to KKR financial details of their assessment of the fund’s position. They are concerned about the highly leveraged nature of the takeover and the risk that the company could go bust.

According to figures released this month, the Boots scheme has a surplus of £20 million under the IAS 19 accounting standard. It would cost more than £4.5 billion to close down the scheme and buy pensions for its members.

The Pensions Regulator is involved in the talks to help to ascertain a suitable level of contribution to the fund.

£305m
amount that the Boots pension fund is in deficit

Source: Boots

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