Intangible Business assists TUI Travel PLC with innovative pension scheme

Intangible Business is delighted to announce its role as independent brand valuation advisors for TUI Travel PLC’s innovative new measures to address the ongoing funding and management of its pension schemes.

On 31 May 2011, four of the current six schemes will merge and the three remaining schemes have been provided with a limited interest in a partnership established by TUI Travel PLC which holds the Thomson and First Choice brands.  Under the partnership arrangements, TUI Travel commits to making payments of up to £275 million in 2026, if and to the extent that the pension schemes remain in deficit at that time.  In addition the partnership, which will receive royalty payments from TUI UK for brand use, will make annual income distributions to the pension schemes totalling circa £16.5 million for 15 years until 2026.

The partnership’s interest in the Thomson and First Choice brands will provide collateral for these payments. All revenues, profits and cash flows from the First Choice and Thomson businesses will continue to be consolidated in the Group’s accounts and TUI Travel will retain day-to-day operational control of the brands. The agreement will not impact the deficit calculated on an IAS 19 basis.

Intangible Business was engaged as an independent brand valuation specialist to advise both TUI Travel and representatives of its six pension schemes on the value of TUI Travel’s leading brands, Thomson and First Choice. Intangible Business was also charged with communicating and presenting the valuation details and specific areas of interest to trustees to ensure a mutually beneficial solution for both TUI Travel and the pension schemes.

Stuart Whitwell, joint managing director of Intangible Business, who led the Intangible Business team, says: “This is a watershed moment for the pensions industry. This is the first time brands have been provided as security to pension fund trustees to mitigate a pension deficit. Everyone has worked extremely hard in ensuring a successful outcome, and one that benefits all parties.

Whitwell added: “Thomson and First Choice are hugely valuable brands and leaders in their industry. This new arrangement is an effective way of using an unleveraged asset to manage a pension liability. Trustees benefit from a healthier sponsor company, guaranteed royalty payments and now have security over two valuable assets.”