The trustees of the Boots pension fund delivered a stinging blow yesterday to the potential new owners of Alliance Boots, Stefano Pessina and Kohlberg Kravis Roberts, arguing for a £1 billion injection to protect the scheme.

The unexpected demand has plunged the £11 billion private equity-backed takeover bid into disarray just one week after it won a recommendation from the board.

In a letter to members, John Watson, chairman of the Boots Pension Scheme, gave warning of the “serious implications” of the high levels of debt envisaged by KKR. He said: “We have had a number of detailed discussions with AB Acquisitions Limited [KKR/Pessina’s vehicle] in order to clarify both the proposed financing structure of its offer and its plans for the future funding and security of the scheme.

“I regret to inform you that no agreement has, as yet, been reached, although discussions are continuing.”

The US private equity group and Mr Pessina, the Italian billionaire who is the Alliance Boots executive deputy chairman and its biggest shareholder, are close to completing a scheme document that could be sent to shareholders as early as next week.

The trustees felt it was important to clarify their position beforehand. The Boots scheme, which has about 67,000 members, has a deficit of about £305 million largely because of increased average life expectancy.Mr Watson said that in the long term, the scheme would need more than three times that amount to ensure its financial stability in the event of Alliance Boots going bust or being closed down.

Because of the highly leveraged nature of the KKR/ Pessina bid, the trustees are seeking an immediate cash injection of at least £305 million plus longer-term guarantees to ensure the scheme remains properly funded in the event of a crisis. Although KKR can still submit a formal offer to shareholders without agreement from the trustees, the Pensions Regulator could be called in.

Adding to the problems facing KKR, the Pensions Regulator added its voice to the yesterday debate by reminding trustees of their responsibilities when faced with highly leveraged mergers and acquisition deals. The watchdog said scheme trustees should consider seeking larger upfront payments to help to safeguard assets. Italso said that companies should consider applying for regulatory clearance when a takeover or sale significantly weakens an employer’s covenant with its pension scheme, regardless of whether it had a substantial deficit. Mr Watson said the trustees had met the Pensions Regulator.

In a statement, KKR and Mr Pessina insisted that “substantial progress” had already been made towards resolving the disagreement. “We recognise the importance of ensuring that all of the Alliance Boots pensions schemes are prudently funded and will continue to work with the trustees of each of the schemes to reach agreement,” their statement said.

AB Acquisitions said in a note to the Stock Exchange that it remains committed to the deal. On Wednesday, Richard Baker, the Alliance Boots chief executive, said he believed the pension “remains well-funded” and he was “satisfied” the new owners would be able to reach an agreement.

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