Whitbread to ‘reduce’ pension debt as part of £3.9bn Costa deal

Whitbread has said it will make a contribution to its pension fund as part of its proposed £3.9bn sale of Costa Coffee to The Coca-Cola Company.

As part of the deal, Whitbread said it will look to “reduce financial indebtedness” and reach an agreement with the pension trustees in relation to the extent of the contribution towards the deficit.

Whitbread’s defined benefit deficit stood at £289m as at 1 March 2018. It is unclear how much the group would contribute to the scheme.

Commenting on the deal, Whitbread said: “Net cash proceeds will also be used to reduce the group's borrowings and the group's pension fund deficit. A reduction in the group's indebtedness will provide headroom for further expansion of Premier Inn in the UK and Germany.

“Discussions with pension trustees and other relevant stakeholders will be conducted and an update on the amount and method to return proceeds will be provided in due course.”

In April, Pensions Age reported that Whitbread’s DB pension deficit dropped by £136m on and IAS19 accounting basis, as the group revealed plans to split the Costa and Premier Inn businesses.

As a result of the triennial review, undertaken at 31 March 2017, Whitbread agreed with the trustees to pay £85m each year from 2019 to 2022, with a final contribution of £57m in 2023.

Furthermore, additional contributions to the pension fund of around £10m per year will continue to be made through the Scottish Partnership arrangements.

Whitbread said it expects to complete the transaction in the first half of 2019.

Pensions Age has contacted Whitbread for comment.

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