De La Rue trustee signs MoU with private equity bidder
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The trustee of the De La Rue Pension Scheme has struck a funding agreement with Atlas Holdings, the private equity house taking over the banknote maker.
The company which ceased making British passports when the government gave the contract to a French provider has recommended the £263m offer by Atlas Holdings, reportedly rejecting a higher bid by financier Edi Truell.
As part of the proposal to buy De La Rue, Atlas entered a memorandum of understanding with the defined benefit pension trustee – represented by Pan Trustees – on 10 April, before the recommended offer was made public. According to the MoU, Atlas will honour a £37m contribution to the DB scheme, split between £32.5m to be funded following completion of the sale of De La Rue’s Authentication Division and £4.5 million falling due in April 2025.
Going forward, De La Rue will be required to make incremental contributions in the event of the agreed funding targets for the scheme not being met, if De La Rue’s level of indebtedness is higher than specified levels, or if De La Rue becomes insolvent. Atlas has also agreed to provide a limited covenant to the pension trustee to make contributions into an account held by De La Rue for the benefit of the DB scheme if De La Rue fails to make required contributions.
From 2032, the scheme is expected to be fully funded on a low dependency basis, and De La Rue will then fund to an even stronger basis agreed with the pension trustee by 2035, with Atlas providing security for those payments, according to the takeover documents. As at 31 December 2024, the scheme had a net deficit on a technical provisions basis of £68.9m.
It is common in large transactions for trustees to reach some kind of agreement with potential purchasers before transactions are announced, subject to takeover code rules, opined Vikki Massarano, a partner at Arc Pensions Law.
However, Carolyn Saunders, a partner at law firm Dentons, said the fact a MoU has already been signed is “quite unusual because trustees don't normally have that sort of early access”.
Before the offer was made, De La Rue had agreed with the trustee to make a payment of £30m from the proceeds of the sale of the Authentication Division to Crane NXT, and to increase contributions already payable by a further £12.5m over the period ending 5 April 2027. The roughly £654m scheme was targeting full funding by 2030. It was 89.3% funded in September last year.
Before the offer was made, De La Rue had agreed with the trustee to make a payment of £30m from the proceeds of the sale of the Authentication Division to Crane NXT, and to increase contributions already payable by a further £12.5m over the period ending 5 April 2027. The roughly £654m scheme was targeting full funding by 2030. It was 89.3% funded in September last year.
How can pension trustees get early access to a company making a bid for the sponsor?
