The Commons Work and Pensions Committee is to scrutinise the deal to sell Bernard Matthews to Ranjit Singh Boparan after a report for the Committee claimed the deal had been “carefully crafted” to dump the turkey giant’s pension liability.
A report published today (10 October) by the Committee and compiled by University of Essex academic prof Prem Sikka, condemned the pre-pack administration deal to sell the ailing turkey giant to Singh’s private investment vehicle last month, for paying no attention “to the hardship caused to retired and existing employees”.
The sale to the Boparan Private Office secured 2,000 jobs and ”saved Christmas dinner for millions of families across the UK”, said a spokesman for the food industry tycoon, but under the terms of the deal, unsecured creditors and pension fund members stood to lose the most, Sikka’s report said.
Some £46.6m from the sale price of £87.5m would be used to make a full payment of £46.6m to lenders Wells Fargo Capital Finance and PNC Financial Services, while former owners Rutland Partners had already received £34m and was likely to receive £39m in total from the sale, the report said.
“In contrast, the Bernard Matthews Pension Fund, recording a published deficit of £17.5m (which is likely to grow to £20m), was set to receive no more than 1p in the pound, or perhaps next to nothing,” the report said, with the industry-backed Pension Protection Fund set to inherit the liability.
Unsecured creditors of £39m were also unlikely to receive no more than 1p in the pound, it added, with HMRC owed more than £1.3m in tax and National Insurance contributions.
“The administration strategy seems to have been carefully crafted to enable secured creditors and controllers of Bernard Matthews to extract maximum cash from the company and dump the pension scheme and other liabilities. No attention has been paid to the hardship caused to retired and existing employees,” Sikka said.
“It is all too easy for companies, their directors and shareholders to extract cash and dump pension obligations to employees, leaving the Pension Protection Fund or taxpayers to foot the bill, and effectively boost returns to corporate elites.”
Work and Pensions Committee chairman Frank Field called on the government to tighten pension regulation.
“What looks likely to be an increase in these pre-pack arrangements, which act to the huge detriment of pensioners, and bump up still further the levies on good employers through increased Pension Protection Fund contributions, is no doubt an issue the Committee will want to look at early on Parliament’s return,” he said.
A spokeswoman for Rutland Partners said it had ”invested significant funds into the Bernard Matthews business and brand over the last 3 years in a continually challenging market”.
Whilst it was disappointed the business had continued to struggle during its ownership ”we are pleased it has now been acquired by Ranjit Boparan with access to a large, UK poultry group and that all the jobs have been preserved”, she added.
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