UK - The John Lewis Partnership has agreed to transfer its 29% stake in the online supermarket service Ocado, valued at £128m (€158m), to the John Lewis Partnership Pension Fund.
The decision to transfer its shares to the £1.86bn pension scheme, follows confirmation of a new five-year branding and outsourcing agreement with Ocado that is designed to "simplify" the relationship between the Partnership - which owns the high street stores John Lewis and Waitrose - and Ocado.
Following approval of the deal, the John Lewis Partnership claimed transferring the £128m stake would make the pension fund "more secure" through owning a "valuable asset", while it also suggested the transfer "has the potential to reduce any future funding deficit".
The Partnership claimed following a "thorough process" in which it explored all of its options, the transfer to the pension fund was "the most attractive option" as it would allow Ocado to pursue aggressive growth plans for "the long-term financial benefit of partners".
Trustees of the pension fund have now approved the transaction after seeking external professional advice, and the Partnership will now be classed as a supplier and commercial partner to Ocado, rather than as a shareholder.
Charlie Mayfield, chairman of the John Lewis Partnership, said: We believe that now is the right time for us to simplify and clarify our relationship with Ocado. The structure of the transaction we are announcing today is an effective way of achieving that while still allowing our partners to benefit from any future increase in Ocado's value."
The transaction follows confirmation in the Partnership's interim results in September that changes to its pension scheme would come into effect from 1 October 2008, which included reducing the waiting period to enter the non-contributory defined benefit (DB) scheme from five to three years. (See earlier IPE article: John Lewis moves to boost DB take-up)
However, the results also showed the total charge for the final salary scheme was £50m, an increase of £8m or 19% from 2007, which reflected the "impact of worsening economic conditions on the assumptions used to calculate the pensions cost, together with an increase in pension liabilities".
The interim report revealed the deficit of the pension scheme increased from £554m at the end of January 2008 to £711m six months later at 26 July 2008, although looking ahead it confirmed the net cost of the improvements to the pension scheme, expected to be £6m, would be included in the Partnership's full year results.
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