A report commissioned by a powerful group of MPs has criticised the sale of Bernard Matthews to Boparan Private Office for its “dumping” of final salary pensions on the government’s rescue fund.
Professor Prem Sikka, of the University of Essex, was asked to break down constituent parts of the pre-pack administration deal that saw Bernard Matthews bought from administration for £87.5m.
The sale did not include the company’s final salary pension scheme, which will transfer to the government’s Pension Protection Fund, paid for with a levy of other final salary schemes.
Prof Sikka said the deal had served investors before employees or pension scheme members.
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 Professor Prem Sikka, University of Essex
“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.”
He found owners Rutland Partners would receive up to £39m from the sale, with the remainder going to other investors. Prof Sikka said proceeds towards the pension pot would likely be “1p in the pound at best”.
He added the administrators had billed £790,000 for their handling of the transaction.
Boparan Private Office, a private investment vehicle of 2 Sisters CEO Ranjit Singh, acquired the assets of the business, but not its pension fund, which has posted a deficit of some £17m.
It had offered to buy the business for an undisclosed amount earlier this year, but was turned down.
In August, another offer was made using a pre-pack administration, meaning Bernard Matthews would be bought directly from insolvency.
By late September this deal had concluded, securing the crucial Christmas business and employment.
Labour MP Frank Fields, who is chairman of the Commons select committee for work and pensions, has criticised the way in which this arrangement can “cherry pick” assets without taking on liabilities.
Mr Fields added the deals “act to the huge detriment of pensioners, and bump up still further the levies on good employers through increased Pension Protection Fund contributions”.
He pledged to investigate the pre-pack administration mechanism when his committee next sat.