A giant Middle East sovereign wealth fund is close to buying a stake in the British pensions buyout firm which has struck deals with blue-chip companies including EMI and B&Q-owner Kingfisher.
Sky News has learnt that the Abu Dhabi Investment Authority (ADIA) has entered exclusive talks to acquire JC Flowers’ 21.4% shareholding in Pension Insurance Corporation (PIC).
A deal, which could be struck in the coming weeks, is expected to value PIC at about £3bn.
It will mark the latest change in ownership of a chunk of PIC, which oversaw nearly £26bn of assets at the end of last year, insuring more than 150,000 pension fund members.
Last year, the former Formula One (F1) motor racing owner CVC Capital Partners bought a minority stake in PIC, with other shareholders in the company including Legend Holdings, which part-owns the Chinese personal computing group Lenovo, and Reinet, a Luxembourg-based investor.
The latest deal is expected to lead to a stock market listing within a couple of years.
If completed, ADIA’s roughly £650m purchase will rank among the biggest direct investments made by the sovereign fund’s private equity team.
ADIA, which is one of the world’s largest state-backed investment entities, has been building its in-house team in order to acquire a more stakes in companies directly rather than solely relying on the private equity funds it also invests in.
Bankers say they anticipate ADIA’s presence in a growing number of auctions given the scale of its financial muscle.
Sources said that ADIA had been bidding for the PIC stake against a number of other parties, including at least one Canadian pension fund and Challenger, the Australian financial services group.
It is possible that other minority investors in PIC will choose to sell some of their shares to ADIA as part of the same transaction, they added.
PIC has demonstrated a strong new business pipeline during the last year, insuring pension liabilities from companies including Pirelli and 3i, the listed private equity group.
Other corporate clients include the London Stock Exchange Group, Cadbury and Honda, while it also has a growing public sector pipeline.
It is one of a crop of specialist pension buyout firms, whose ranks also include fellow flotation candidate Rothesay Life.
PIC enjoyed a strong 2017, reporting underlying operating profit of £195m.
Its business involves insuring third parties’ corporate pension schemes and taking on responsibility for making retirement payments to their members.
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 pension deficits at companies such as BHS and Carillion.
ADIA, JC Flowers and PIC declined to comment.