Asda Stores Ltd., its parent Walmart Inc. and pension trustee agreed to a £3.8 billion pension buy-in with insurance company Rothesay Life PLC, according to an Oct. 18 release.
Under the arrangement, Rothesay will be responsible for paying the retirement benefits of about 12,300 members of Asda's pension scheme. The insurer will provide members with individual annuity policies that will replace the food retailer's bulk annuity policy and bring about a full scheme buyout, which is anticipated to be completed in late 2020 or early 2021.
The deal is expected to be enabled after the U.K. grocer makes a one-off final pension contribution of about £800 million into the scheme.
Walmart anticipates a pre-tax charge of about $2.2 billion to its earnings after the buyout is completed.
"The transaction will remove all future scheme liabilities from the Asda and Walmart balance sheets, simplifying the business at a cost which is significantly below the expected future cost of funding internally," Asda said in a statement.
The move comes after Asda CEO Roger Burnley said in July that the company is aiming for an IPO in the next two to three years following its failed merger with J Sainsbury PLC.