Abu Dhabi state fund eyes stake in £3bn pension buyout firm PIC

One of the world's biggest sovereign wealth funds‎ is plotting to buy a big stake in the pension buyout firm which stands behind the retirement obligations of companies including EMI, the music publisher, and WPP (Frankfurt: A1J2BZ - news) , the marketing services giant.

Sky News has learnt that the Abu Dhabi Investment Authority (ADIA) is among a small number of parties in talks ‎to acquire JC Flowers' 21.4% shareholding in Pension Insurance Corporation (PIC).

The process, which is being run by bankers at Evercore and is at an early stage, is expected to value the whole of PIC at close to £3bn.

ADIA is likely to bid for the majority of the Flowers stake, ‎with CVC Capital Partners, the private equity group which previously owned Formula One motor racing, potentially buying a small chunk of the shares to take its own holding in PIC up to 20%.

CVC (Taiwan OTC: 4744.TWO - news) bought into PIC a year ago, since when it has insured pension liabilities from companies including Pirelli and 3i, the listed private equity group.

PIC is one of a crop of large pension buyout firms, whose ranks also include Rothesay Life.

It enjoyed a strong 2017, reporting underlying operating profit of £195m.

Last year, Legend Holdings, which part-owns the Chinese personal computing group Lenovo, bought a big stake in PIC, which is expected to consider a stock market listing in the next couple of years.

PIC's other shareholders include Reinet, a Luxembourg-based investor.‎‎

Like its rivals, PIC specialises in insuring third parties' corporate pension schemes and taking on responsibility for making retirement payments to their members.

The company insures more than 150,000 pensioners through the schemes it has struck deals with, and has over £25bn in financial investments.

PIC's other corporate clients include the London Stock Exchange Group, Cadbury and Honda, while it also has a growing public sector pipeline.

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.

The number of trustees looking to do so in the UK has increased in recent months amid public controversies over the pension deficits at companies such as BHS and Carillion (Frankfurt: 924047 - news) .

Sky News revealed last month that a group of prominent City figures including the former boss of the Pension Protection Fund had joined forces to launch Pensions Superfund, a new vehicle aimed at pooling companies' defined benefit schemes.

ADIA declined to comment on Thursday.