Boots owner offloads £4.8bn pension scheme ahead of expected revival of sale process

boots

The owner of Boots has offloaded the pharmacy chain’s pension scheme in a £4.8bn deal that could pave the way for the potential restart of the pharmacy chain’s sale process.

Walgreens Boots Alliance said it has agreed to hand responsibility of its defined benefit pension scheme, one of the biggest in Britain with 43,000 members, to Legal & General.

Boots will pay around £170m of already committed payments to the scheme, as well as further contributions of around £500m before Legal & General starts issuing annuity policies to members.

The deal, which is the biggest single transaction of its kind, comes as speculation grows over whether Walgreens will revive plans to sell Boots.

The US owner shelved the potential sale last year after the “unexpected and dramatic change” in financial markets, although its legacy pension fund was also viewed as a potential blocker to a deal.

Executives at Walgreens have recently been under pressure to strengthen the company’s US focus in recent months by spinning off its international operations.

Last month, Walgreens announced it was cutting $1bn of costs from its operations in America.

However, it has also been looking to trim back its store footprint in the UK and Walgreens earlier this year said it was planning to shut around 300 Boots stores by next June.

As of June, it had 2,200 stores across the UK and Walgreens has said wants to reduce this to 1,900.

Walgreens said the deal with L&G was the “best way to safeguard members’ benefits against market uncertainty, improved life expectancies and other risks”.

Alan Baker, on behalf of Law Debenture as chair of trustee for the Boots Pension Scheme, said the agreement meant the scheme would protect pensions for decades to come.

Andrew Kail, chief executive of Legal & General Retirement Institutional, said: “We are continuing to see an unprecedented acceleration in demand in this sector, driven by more pension schemes being closer to buyout than ever before.

“Against this backdrop, we have posted a record year with £13.4bn of global pension risk transfer written to date.”

As recently as August, the Boots defined benefit pension scheme had a surplus of $79m (£63m).