F1 Investor CVC Vies For Pension Buyout Deal

The biggest shareholder in Formula One motor racing is competing to invest hundreds of millions of pounds in a pension buyout firm which has insured the retirement schemes of Cadbury and EMI Music.

Sky News has learnt that CVC Capital Partners is among several parties who are in discussions with Pension Insurance Corporation (PIC) about a deal.

The talks about an investment, which are unlikely to be completed until the new year, could see the taxpayer-backed Royal Bank of Scotland (LSE: RBS.L - news) offload its long-standing shareholding in PIC.

RBS's investment in the firm, which specialises in insuring third parties' corporate pension schemes and taking on responsibility for making retirement payments to their members, dates back to the period before it was bailed out by British taxpayers in 2008.

Sources said on Friday that PIC, which has insured dozens of major UK pension schemes since its launch, has been holding talks about a capital-raising for several months.

Among the other prospective investors competing to secure a deal to acquire a stake in PIC are Carlyle, another big private equity group, and an unnamed Qatari entity, the sources said.

The talks come as insurers prepare to discover how they will fare under a new regulatory regime known as Solvency-II, which will govern how much capital they must hold against a range of risks.

PIC completed the market’s largest full buyout this year, a transaction with the £2.4bn Philips Pension Fund, while other clients over recent years have included the London Stock Exchange (Other OTC: LDNXF - news) , Aon (NYSE: AON - news) , EMI, Citi, Honda and the Institute and Faculty of Actuaries.

In 2009, it insured £500m of liabilities for the Cadbury Pension Fund.

The exact sum that PIC is seeking to raise could vary depending upon whether the firm mounts a formal bid for a large chunk of business which has been put up for sale by Aegon (Swiss: AGN.SW - news) , the Dutch insurer.

PIC is likely to seek between £200m and £400m of new equity, with investment bankers at Lazard handling the process, the sources added.

The pension buyout industry has grown rapidly during the last decade as companies have sought to find ways of managing the longevity risk embedded in their defined benefit pension schemes.

PIC's two largest shareholders are Reinet Fund, which owns 43%, and JC Flowers, which owns 25%.

These two investors are seen as being unlikely to substantially reduce their stakes.

The company's other institutional shareholders include Dubai's Istithmar World, RBS, Swiss Re (LSE: 0QL6.L - news) , Och Ziff Capital and JP Morgan, whose combined stakes total roughly 20%.

PIC, CVC (Taiwan OTC: 4744.TWO - news) and Carlyle all declined to comment on Friday.