Consultants have broadly welcomed new rules from the UK Takeover Panel on the disclosures bidders must make concerning pension schemes sponsored by target companies, but suggest a limited impact.

Its response to the consultation last year requires the bidder’s offer document to spell out plans regarding contributions, including current arrangements for repairing deficits; accrual of benefits by existing members; and admission of new members.

The document must now also be made available to trustees, and any opinion trustees provide on the offer must be appended to the circular prepared by the target company’s board.

Towers Watson senior consultant specialising in M&A Stephen Postill welcomed the rules: “In part, the Takeover Panel’s new requirements formalise existing good practice, which already gives trustees a seat at the table where there are significant pension issues, but they should increase transparency and provide trustees with a stronger platform from which to express their views.”

However, he noted the rules “watered down” some of the original proposals. It has dropped requirements for bidders to outline the impact of their strategic plans on the pension to trustees, and for boards of target companies to express an opinion on how a deal would impact the scheme. The rules also clarify that only defined benefit schemes are within its scope, and that statements made in the offer document will only be binding for 12 months.

Sackers partner Fuat Sami said the changes “lack any real teeth”.

“The changes are mainly designed to give trustees more information at an early stage and to allow them to express an opinion (treating them in a comparable way as employee representatives). But this is not the same as offering tangible protection.”

Bidders for public companies will be required to comment on the impact on contribution and benefit levels, he noted. “Yet significantly there is no requirement for a bidder to make a statement about the impact of its offer on the employer's covenant, which will be the chief concern of trustees.”

Barnett Waddingham partner Nick Griggs said he expected little change would result.

“In our experience companies usually take appropriate advice and typically engage directly with trustees where the pension scheme is a significant component of a takeover. Therefore in our view, the proposals should not have a significant impact given the way takeovers generally work in practice at the moment.”

Share Story: