Truell takes on Telent

Edmund Truell’s specialist pension buyout fund, Pension Corporation, faces a fight in its battle to take over Telent, the rump of Lord Weinstock’s GEC empire.

Former Duke Street Capital boss Truell set up Pension Corporation last year, with backing from influential investors, including JC Flowers, RBS and HBOS, in order to take on the liabilities of final salary pension schemes for a fee.

This week Telent’s board recommended a £398m (€568m) offer from Pension Corporation. But Chris Holden, chairman of the pension fund trustees, said he had not been privy to the offer and was unaware of the bidder’s plans for the pension scheme.

Truell has already overcome one obstacle, persuading Polygon to sell the majority of its 29% stake in Telent to Pension Corporation. The hedge fund blocked a £346m (€494m) offer last year from US private equity group Fortress Investments.

Polygon believed Fortress’s 529.5p a share proposal didn’t take into account the £490m held in escrow for the group’s £3bn pension scheme. Now it has emerged that another hedge fund MKM Longboat, headed by Jorge Villon, has taken a 7.1% long position in Telent, via derivatives.

Telent’s shares stand at 586p, below Pension Corporation’s 600p a share offer price. This suggests the bidder faces a long campaign to persuade Telent shareholders to accept its price, despite being 18% above the 510p level the shares stood at prior to the offer.

In addition to Polygon’s promised 26.4% holding, Pension Corporation already holds a 3% stake in Telent.

Truell said he aims to split the pension fund from the operating business, in order to give the management team “our full support in re-building a strong and high quality service business”. However, he conceded that such negotiation had yet to commence. “It’s too early to talk about putting a comprehensive plan in place. The trustees have done a good job and already outsourced the administration to a Pension Corporation company.”

Holden said he “will seek to meet with the management of Pension Corporation to hear their proposals for scheme funding and security and will also discuss their proposals with The Pensions Regulator”.

Lazard has advised Telent, with JP Morgan Cazenove acting as broker. Merrill Lynch acted for Pension Corporation. The trustees are advised by solicitor Sacker & Partners.

Chris Spink