J Sainsbury has informed The Pensions Regulator about the proposed merger of Sainsbury’s supermarkets with Asda, since this deal could have an impact to the company's pension scheme.
The deal, which was confirmed this week (30 April), will merge both supermarkets into a business with £51bn in combined revenues, but retaining separate brands.
Walmart will retain the Asda scheme as part of the transaction, along with any ongoing defined benefit pension related obligations if the competition watchdog gives the go-ahead to the deal.
Mike Coupe, group chief officer at the retailer, said in a letter to Labour MP Frank Field, chairman of the Work & Pensions select committee, that the company informed the watchdog of the deal over the weekend, and is now arranging a meeting with them.
Mr Field had questioned if the company had applied for clearance with the regulator.
The Pensions Regulator spokesperson confirmed these talks.
He said: "We are in active discussions with all parties involved in the merger.
"We are supporting the pension scheme trustees as they seek to secure the best possible outcome for members.
"We expect any business planning a major corporate transaction to identify if there is potential material detriment to a pension scheme and explain how they will mitigate against that detriment.
"They can then come to us for clearance to gain assurance that we will not use our anti-avoidance powers."
Mr Coupe argued the merger deal is structured in such a way that it strengthens the pension covenant for the retailer's scheme members.
He said: "This is driven by the equity given to Walmart in consideration for Asda. The covenant will also benefit as a result of commercial synergies."
Mr Coupe said that a member of retailer's pensions team was involved in the transaction negotiations from an early stage, and that a sub group of the trustee board, to which the proposal was shown, supported the merger.
The proposed combined group will be responsible for one pension scheme only, the Sansbury's Pension Scheme, which according to results published on Monday (30 April) has a IAS 19 deficit of £261m at 10 March 2018, falling by £589m when compared with the previous year.
Mr Coupe added that this decrease was driven by an increase in the discount rate and updates to future mortality assumptions.
The merger is expected to be completed in the second half of 2019.
maria.espadinha@ft.com
