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Invensys Pension Deal Could Ease Takeover, BofA Merrill Says

Invensys Plc, the maker of controls for Whirlpool washing machines, could remove a “perceived poison pill” blocking potential takeovers if it disposes of a 4.1 billion-pound ($6.7 billion) pension-plan deficit in the U.K., according to Bank of America Merrill Lynch.

While buying out the pension plan might cost between 400 million pounds and 1 billion pounds, Invensys would then be able to sell assets without contributing some of the proceeds to the plan and would eliminate pension-servicing charges, analysts including Alex Toms wrote in a note today.

Invensys held talks with pension providers and sees opportunities to remove the liability, acting Chief Financial Officer David Thomas said last month. Company directors are evaluating offers from three companies to take over the retirement plan and will select one within months, the Sunday Times reported June 12.

“Resolution of the U.K. pension scheme would clearly be taken well by investors,” the BofA Merrill Lynch analysts said in the note.

Shares of Invensys, which has dropped out of the FTSE 100 benchmark index, have declined 14 percent in London trading this year, valuing the business at 2.5 billion pounds.

U.K. engineering companies have recently attracted takeover bids from overseas investors. Canada Pension Plan Investment Board and Onex Corp., the nation’s biggest buyout fund, last year bought Tomkins Plc for $4.8 billion, while Emerson Electric Co. bought Chloride Group Ltd. for $1.6 billion after outbidding ABB Ltd.

A bid for London-based Invensys is “possible, but not certain,” RBC Capital analyst Andrew Carter wrote in a March 29 note.

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