UK - Philips today announced the sale of its stake in chipmaker NXP to its UK pension fund as part of a funding proposal agreed with the the UK scheme trustees.
As part of the proposal, Philips is making contributions of €350m to its UK pension fund, which trustees will use to buy the company’s holdings in NXP.
A spokesman for Philips said: “The ultimate goal is indeed to shore up the pension funds finances and this forms an important part of the recovery plan that we’d agreed with the pension fund trustees to get the pension fund back on stable financial footing in the coming years.”
The recovery plan was finalised with the trustees in the last 24 hours, he added, but would not disclose the extent of the fund’s deficit.
NXP, a chipmaker, was floated on the New York stock exchange in early August. It was trading at $11.89 (€9.23) when markets closed on Monday, down 15% from its original IPO.
The sale will lead to €140m gain for Philips, as it will be conducted based on current share prices, compared the book value the company held the shares under prior to the IPO.
In other news, occupational pension schemes, subject to the 5% self investment cap, are to see the collective investment exemption withdrawn.
Currently, occupational schemes can invest up to 5% of their assets in their sponsoring employer, but the exemption for investments held in UK collective investment schemes is to be removed from 23 September.
This means that company pension schemes will have to ensure that all the collective investment schemes they invest in do not exceed more than 5 per cent of their sponsors’ shares.
Andrew Bradshaw, a partner at law firm Sackers & Partners said: “Whilst not unexpected, this is disappointing news and will give some pension funds a real headache as they try to work out how to ensure that they do not inadvertently breach the employer related investment rules.
“It’s particularly worrying for trustees because a breach of these regulations could lead to fine or even imprisonment,” he added.
Update: A spokesperson for Philips at first said that the company’s funding proposal had been signed off by the UK Pensions Regulator. However, an agreement has currently only been reached between the company and trustees.