West Midlands-based telecom and IT network services firm Telent yesterday agreed to a near #400 million takeover by a specialist pension fund manager.
The #398 million deal effectively marks a tame ending for former British engineering conglomerate GEC .
Shares in Coventry-based Telent rose 15 per cent after it said shareholders would receive 600 pence from financier Edmund Truell's Pension Corporation, 18 per cent above Monday's closing price.
Truell will acquire a #2.54 billion pension fund with 62,000 members as well as the Telent business, which provides support services to telecoms operators. It will be Truell's third pension fund acquisition since June.
Entrepreneurs have identified a new market after rises in the value of a range of asset types, particularly stocks, over the past few years, wiping out deficits that had made pension funds unattractive.
The Telent pension fund is neutral in that assets match its liabilities. Telent is all that was left of Marconi after it became a victim of the tech bubble and sold most of its assets to Swedish telecoms equipment maker Ericsson in 2005.
Telent retained responsibility for the pension plan of GEC, which was one of Britain's foremost industrial companies when it renamed itself Marconi in 1999 after selling off its defence arm and going on a spending spree to focus on communications and technology systems.
Yesterday's agreed deal follows a previously recommended 529.5 pence per share offer for Telent last year from Fortress Investment Group, which fell through after a major stakeholder, US hedge fund Polygon, scuppered the deal. The collapse of that deal caused Telent chief executive Mike Parton to quit and be succeeded by Mark Plato. He will continue to run the company’s operating businesses, which cover support services to telecoms operators, as well as to large enterprises and public sector agencies in the UK, Ireland and Germany.
The business has around 2,000 staff with annual revenues of #309 million.
"Once private, we intend to free up Mark Plato to focus on the operating business and give them our full support in re-building a strong and high quality service business," said Truell, who is best known as a founder and former head of private equity firm Duke Street Capital.
Pension Corporation already owns Thresher's liquor stores and the pension scheme of Thorn, another former British conglomerate.
It has the financial capacity to manage more than #25 billion of pension scheme liabilities. Its investors include some of the world’s largest financial institutions, including Royal Bank of Scotland and HBOS.
Telent chairman John Devaney said: "This is a good outcome for shareholders and will allow the management team to focus exclusively on the development of the operating business".
Telent shareholders on the register on September 21 will receive the previously announced final dividend of 11 pence on October 17.
Andrew Reid, head of corporate consulting at Watson Wyatt, said that if the deal went ahead, it would be the biggest transfer of pension liabilities in the UK to the secondary pensions buy-out market.
He said: "It is another significant step in the development of the secondary market for pension liabilities. Post-acquisition, it looks like the pension liabilities and assets will be separated from the operating business."