Whitbread’s defined benefit pension scheme, which has around £3bn of liabilities, may make a potential split of Whitbread’s Costa and Premier Inn businesses difficult.
According to The Times Elliott Advisors, which recently revealed it now owns a 6 per cent stake in the business, is putting pressure on Whitbread to split its business in order to create an extra £3bn of additional value.
The paper reported that Elliott Advisors believes that a split would take less than five months and would cost less than £20m, after conducting research looking at the pensions and tax implications of such a change.
However, independent consultant John Ralfe told The Times that “spinning off Costa is not as easy as it sounds”.
“To compensate for the loss of future support from Costa, the pension trustees and The Pensions Regulator would expect a large chunk of cash to be paid into the pension scheme to be acceptable,” he added.
Whitbread’s most recent annual report, published May 2017, revealed that at March 2017, its DB scheme had a deficit of £425.1m, with liabilities of approximately £2.8bn and £2.4bn of assets.
A spokesperson for The Pensions Regulator said: “Generally speaking, we expect any business planning a major corporate transaction to identify if there is potential material detriment to a pension scheme and explain how they will mitigate against that detriment.”