A pensions expert has raised questions about the fate of the Dunlop Slazenger pension fund as Sports Direct prepares to sell the Dunlop sports brand to its Japanese distributor, Sumitomo Rubber Industries.
Accounts for Dunlop Slazenger International, a subsidiary of Sports Direct, indicate the company had a £9.2m pension deficit in April 2015, with sales of £30.6m for the 12 months to 26 April and a loss of more than £20m. Sports Direct has said it is only selling the Dunlop brand – best known for its green flash tennis shoes. It will retain Slazenger, the supplier of Wimbledon’s tennis balls.
Pensions expert John Ralfe, who recently advised a parliamentary committee inquiry into the handling of the BHS pension fund, said: “Will the new owners be guaranteeing the pension obligations of the company they are buying?”
He added that new legislation should be brought in to ensure that such guarantees were given in future.
Frank Field, who chairs the work and pensions select committee, said the Pensions Regulator should be closely examining the Dunlop deal and publicly flagging up any issues. “What can be gained by the regulator’s secrecy?” he said.
Sports Direct should “give reassurance that it is not going to dump the deficit on the pension protection fund and the regulator should be active and reviewing this”, he said.
The regulator declined to comment on a specific case and said seeking clearance was a voluntary matter.
MPs have called for the pension regulator to be given powers to veto takeover deals which put too much strain on pension schemes, among a raft of measures they believe could help avoid a rerun of the situation at retailer BHS, which collapsed in April and prompted recriminations about its £571m pension deficit.
It is unclear whether the pension deficit has changed since the accounts for the year to April 2015 were filed. Sports Direct declined to comment, citing confidentiality and stock market rules.
In a statement to the stock market earlier this week, Sports Direct said the Dunlop business made a pretax profit of £4m on sales of £41.8m this year, figures which it said were unaudited.
Accounts filed for the Dunlop Slazenger group in 2015 at Companies House show a £22.3m loss. The group was technically insolvent, with more liabilities than assets but the accounts state that Dunlop Slazenger remained a going concern as working capital was financed by Sports Direct.
Sports Direct’s founder and major shareholder, Mike Ashley, acquired Dunlop Slazenger for an estimated £40m in 2004 from Royal Bank of Scotland – which had taken control of the struggling business from its private equity-backed owners.
The company is selling Dunlop to a Japanese buyer in a surprise $137.5m (£112m) deal. Sumitomo Rubber Industries, which already owns the Dunlop rights in Japan, South Korea and Taiwan, confirmed that it will acquire the remaining international rights to the brand, as well as its sporting goods and licensing businesses. The deal is scheduled to be completed in May 2017.
As part of the deal it has granted Sports Direct a royalty free licence to continue to usethe Dunlop brand for premium workwear and safety wear sold in its own stores.
Last year, Dunlop Slazenger’s sales were about half the £58m recorded in the year before Ashley took over the group. In 2003 it made a £5.5m loss while its pension deficit stood at £13.3m.
Sumitomo did not respond to a request for comment.
