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KKR agrees pensions deal in bid for Northgate

UK - Private equity firm Kohlberg Kravis Roberts & Co has agreed a deal with pension trustees as part of its £593m (€744m) takeover offer for Northgate Information Solutions.

NIS Acquisitions, a subsidiary firm set up by KKR to buy Northgate Information Solutions, said it recognised the "importance of ensuring that the ongoing funding and security position of these schemes is appropriately addressed".

Northgate, a specialist software and IT company, has 6,490 staff and operates two defined benefit schemes in the UK which had liabilities of £31.8m at the end of October.

NIS Acquisitions said it has held "constructive discussions with the trustees' representatives of each of these pensions schemes and an agreement in principle has been reached" although it is unable to reveal the exact terms of the deal.

However, in its interim results up to 31 October Northgate stated it would be paying a one-off contribution of £15m into the schemes in the second half of 2007, and it confirmed today the money would be paid into the funds within that time frame.

KKR first approached Northgate about a potential offer in November, and its decision to engage trustees in discussions before making a formal offer contrasts sharply with its approach to the £11.1bn takeover of Alliance Boots earlier this year.

The firm's failure to negotiate directly with the Alliance Boots trustees delayed the completion of the deal as pension scheme officials refused to approve the takeover, unless it received a £1bn contribution to cover its estimated £305m deficit and to offset the £8bn of debt KKR would be taking on to finance the deal.

A compromise was finally reached in June when KKR agreed to invest £418m into the scheme and to set up a security plan to give the pension scheme a priority claim to £600m of additional funding.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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