KKR resolves Boots’ pension issue

US private equity group KKR and Stefano Pessina, the executive chairman of Alliance Boots, have overcome a major hurdle in their £11.1bn (US$22bn) purchase of the international health and beauty group.

They have reached an agreement with the Boots’ pension scheme trustees over the company’s pension fund deficit.

After weeks of wrangling, AB Acquisitions – KKR/Pessina’s bidco vehicle – said it will contribute £418m of cash in installments over the next 10 years.

This amounts to a net present value of £305m – the trustees’ estimate of the scheme’s current deficit.

AB Acquisitions will put in place a bank guarantee and specific security package to back these cash installments.

The Boots pension scheme will benefit from an additional £600m security package.

This is designed to protect the long-term benefits of members by sharing in the security granted to KKR/Pessina’s senior lenders and will include a £200m priority claim.