THE PLANNED £129m sale of Aga will put the firm’s defined benefit pension scheme on firmer financial footing, according to the trustees’ adviser.
Aga’s board has approved the offer by Middleby Corporation, including guarantees for the oven-maker’s schemes that have an £84m deficit, reports sister publication Professional Pensions.
John Coleman, Aga chairman, said the deal would give the business more clout and better access to international distribution networks.
He added: “The financial strength of Middleby also achieves a better balance with Aga’s pension obligations – which are large in relation to the existing business and which have become a significant constraint on the progress of the group.”
Aga said attempts to plug the schemes’ deficit had prevented it from promoting and developing its products, or paying a dividend to shareholders for the last three years.
The size of the schemes, which have almost £1bn in liabilities, increased the financial risk profile of the company relative to the firm
A number of measures to address the deficit have been included in the deal, agreed with trustees of the Aga Rangemaster Group (ARG) Pension Scheme, that will replace the current recovery plan.
This includes contributions, funded by Middleby, of £10m a year in 2015 and 2016, and contributions from Aga of up to £2.5m in each of the following six years.
The agreement includes two guarantees to be given to the ARG scheme by Middleby Marshall Inc.
The first is an “unconditional” guarantee of Aga’s obligations to the scheme subject to a cap of £60m and the second is a conditional guarantee with a starting cap of £95m.
The second guarantee is conditional on the trustees abiding by funding and investment strategies agreed with Middleby, while the cap on it will vary dependent on dividends paid out and recovery contributions made.
The trustee was advised by Lincoln Pensions, whose managing director Alex Hutton-Mills said: “The offer should be a win-win for all stakeholders: From a pensions perspective, the scheme members will now have access to support from a much larger US company, better able to support the future risks; together, Aga and Middleby have the combined resources to focus on delivering on the commercial rationale for the deal without having to constantly look over their shoulders at the pension scheme.”
The company had been looking at options to improve its covenant relative to the AGA pension schemes.