A Uniq case study
At this season of year when deals of the year are being selected, one which should certainly fall into this category has just reached fruition.
Last week Uniq Pension Scheme concluded an £830 million buy-in deal with Rothesay Life. This was one of the concluding steps in a long-running saga that had involved a legacy pension scheme from Unigate, the dairy business, with a deficit of £400m, dwarfing a company which at one stage had a market cap of less than £6 million.
In many ways, if you’ll excuse the pun, this pension solution is unique. Resolving the pension issue was crucial for the company and the pension scheme. It required agreement from the Pension Regulator to an unprecedented deal, one which kept the pension scheme out of the Pension Protection Fund. To achieve this, the pension fund took over 90% of Uniq, which had to be agreed by a majority of shareholders. Once this had happened the company joined AIM from the main market. In July, after an auction process, the pension scheme sold the company to Greencore and this month the trustees have concluded the buy-in.
So five major transactions in under a year, each of which required huge effort from the company management, the pension scheme trustees and advisers. Each stage also came under a lot of scrutiny from external commentators and MHP was proactively involved in developing a communications strategy to achieve press support for each stage in the process.
The result could only be achieved by a series of key approvals once the company and trustee had agreed there was only one solution. These involved The Pension Regulator, Pension Protection Fund (PPF) and shareholders. PR was needed to support each of these to influence key stakeholders and opinion formers. Careful handling was required as negative press could jeopardise the process at each stage and the business’ viability.
The PR also aimed to educate and inform different stakeholders in an extremely complex process, especially the 20,000 pension members (many ex-milkmen) and 10,000 retail shareholders (many of whom were also ex-employees) unfamiliar with the process and what was required of them and why.
An initial solution was turned down in July 2010. However at the next set of results in October 2010, the decision was taken to encourage coverage to get the unprecedented pension solution being developed – a debt for equity swap – recognised as the only viable route.
The initial press focus was on influential pension writers, who could see the strength of the joint argument. Taking time with each to run through what all the options were resulted in quite widespread endorsement. (The process succeeded because the independent trustee and the company Board worked independently but closely together and were accessible.)
When the pension Solution was agreed by the regulator, the next stage was to get shareholders to agree to a takeover by the pension scheme, leaving them with the equivalent of 10% of company in total. Over 50% had to vote and many of these were ex-employees who were not familiar with why they should vote, especially as on the face of it they stood to lose 90% of their holding. A key, but difficult, message was to explain that the new shares in the restructuring, without the shadow of the £400 million deficit, would automatically be worth 10 times the previous value. To mobilise small shareholders, press coverage was targeted to encourage them to vote and explaining in plain English what was at stake.
In the event well over 90% voted for the solution, the company was relisted on AIM from the main market and its market cap rose to £80million (and continued to rise thereafter following further positive press comment).
The pension scheme now owned 90% of the company. Following independent advice the trustees decided they would put the company up for sale. By July the company, which could have been made insolvent a few months earlier, was sold very much as a successful going concern for £115m to Greencore. The pension scheme received considerably more than the amount which would have kept it within the Pension Protection Fund and this has enabled the buy-in announced last week.
So the scheme members are better off. Other shareholders instead of having the value of their holdings wiped out have had some value crystallised. And employee jobs have been protected. So it really has been a good deal for all stakeholders – not often that can be said even for deals of the year!