De La Rue Explores Stake Discussions with Edi Truell-Backed Group

Pension SuperFund Capital’s Strategic Acquisition of STM Group

A New Era for UK Pensions

In a significant move that is set to reshape the UK pensions landscape, Pension SuperFund Capital, backed by Disruptive Capital, has acquired the parent group of Options Pensions, STM Group, for a substantial £35.6 million. This acquisition, facilitated through Pension SuperFund Capital’s acquisition arm Bidco, marks a pivotal moment in the consolidation and evolution of the UK pensions market.

The Acquisition Details

The acquisition of STM Group by Pension SuperFund Capital is not just a financial transaction; it is a strategic move aimed at creating a more robust and efficient pension ecosystem. The deal includes an initial payment of 60 pence per share to STM Group shareholders, with the potential to rise to 67 pence per share if the full value is delivered by the deferred consideration units. This could increase the total acquisition value to £39.8 million.

Aligning with Mansion House Reforms

This acquisition is timely, given the recent announcement by the UK’s Chancellor of the Exchequer, Jeremy Hunt, of a package of reforms known as the Mansion House reforms. These reforms are designed to drive consolidation in the pensions sector, reduce costs, and enable pension funds to invest in higher growth assets, particularly in private markets such as infrastructure.

Pension SuperFund Capital is positioning itself at the forefront of this change, aiming to create better outcomes for pensioners and alleviate the burden of pension liabilities from employers.

Synergies and Growth Opportunities

The STM Group’s business lines are seen as complementary to those of Pension SuperFund Capital. However, it was noted that STM’s businesses lacked the scale necessary to provide investors with access to a broad range of portfolios, including less liquid growth assets.

By combining STM’s customer base and assets with Pension SuperFund Capital’s advanced technology and access to capital, the new entity is expected to create a strong platform for consolidating defined contribution and defined benefit pensions. This integration is anticipated to enhance cost efficiency and improve investor outcomes, leveraging the latest technology to optimise legacy systems.

Vision for the Future

Edi Truell, co-founder of Pension SuperFund Capital and founder of private equity group Disruptive Capital, expressed strong support for the acquisition. He emphasised that the combined business will provide increased security and value-for-money benefits to members, aligning with the goals of the Mansion House reforms.

Truell’s vision is to deliver a complete solution for pension savers and sponsors globally, enhancing pensioner outcomes in a cohesive and sustainable manner.

Addressing Uncertainties and Risks

Nigel Birrell, chair of STM, acknowledged the significant premium offered by Bidco, which represents a substantial value for STM shareholders. While STM recognised growth and value realisation opportunities in the short to medium term, there were also uncertainties and risks associated with optimising growth as a standalone entity.

The acquisition by Pension SuperFund Capital mitigates these risks and offers the potential for additional commercial benefits as part of a larger, more resilient group.

Broader Implications for the UK Pensions Market

This acquisition reflects a broader trend in the UK financial sector, where there is a growing shift towards market-based finance and the unbundling of traditional banking activities. According to the Bank of England’s “Future of Finance” report, non-bank financial institutions have seen significant growth, and market-based finance now accounts for a substantial portion of financial intermediation globally.

This shift underscores the need for innovative financial infrastructure and regulatory support to ensure the resilience and efficiency of the financial system.

Conclusion

The acquisition of STM Group by Pension SuperFund Capital is a landmark event in the UK pensions sector, driven by a clear vision to enhance pension outcomes and efficiency. As the UK pensions market continues to evolve, such strategic consolidations will be crucial in delivering better value for pensioners and employers alike.

At Cutts & Co Accountancy, we are keenly observing these developments, recognising the importance of staying abreast of regulatory changes and market trends to provide the best possible advice and services to our clients.

This acquisition marks a significant step forward in the UK’s journey towards a more streamlined, efficient, and secure pensions system, and it will be interesting to see how this evolves in the coming years.