Citigroup sells EMI Group Pension Fund to Pension Corporation

Citigroup has sold the £1.5-billion EMI Group Pension Fund, to the specialist insurer Pension Corporation, in the largest ever pension buyout in the UK market.

The deal ends Citi's ownership of the UK music-publishing business, which had played host to artists including the Beatles, the Sex Pistols and Radiohead over the years. The deal would mean 20,000 EMI pensioners would have their incomes guaranteed.

Pension Corporation has acquired the fund for £1.5 billion and according to EMI's most recent accounts, the scheme had only £1.15 billion worth of assets as of 31 March, 2012.

In a letter to members last summer, the trustees of the scheme disclosed that the bank had agreed to fund the scheme to the level required to undertake a buyout transaction within the next five years, with a contribution of  £240 million to start with.

Citi offered no comment on whether it had had to make a further contribution to the fund, either from its own coffers, or the EMI businesses, to make good the remaining £145 million shortfall between the buyout price and the scheme's asset pool.

The EMI pension trustees are chaired by Clive Gilchrist, of independent trustee firm Bestrustees, who, in an interaction with Financial News yesterday said market movements had not affected the EMI scheme's finances in a material way, with the board having taken steps to hedge the scheme's exposures to interest-rates and inflation.

He said in a prepared statement earlier in the day, "I have written to the fund members telling them that their benefits have been secured in full with Pension Corporation; as a trustee, fully securing benefits is the ultimate goal. An enormous amount of time and effort has been put into this by all concerned. The outcome demonstrates how worthwhile it has been."

The deal comes as a rare recent example of a large pension buyout and deals of the type have been fewer than expected given the low bond yields, which had depressed prices.

According to Swapnil Katkar of Citi's pension solutions team, Citi had run a disciplined process that allowed the trustee and sponsor to achieve their objectives of acquiring all risk cover on competitive terms from a leading provider.

The breaking up of EMI came with a protracted sale process, with Vivendi's Universal Music Group acquiring most of its recorded music business while a Sony-led consortium acquired EMI's music publishing division.

The deal, which had attracted intense regulatory scrutiny, finally got the clearance of European antitrust authorities, after Universal agreed to sell off a third of EMI – including disposing of its Parlophone label to Warner Music – ending the music group's 80 years as an independent company.