University College Cork acquired a private business college without picking up the tab for its pension scheme, which previously had a deficit of more than €10m.
The takeover of the Irish Management Institute (IMI), in Dublin, late last year, has raised concerns within UCC, and senior management were quizzed on it by the Dáil Public Accounts Committee (PAC) in late March.
The deal was first put forward by UCC in 2009, but was blocked for several years, because the Department of Finance would not support UCC’s proposal that pension liabilities should be taken on by the State, in any takeover. The shortfall in the pension fund was more than €10m in early 2010.
At the recent PAC hearing, UCC chief financial officer, Diarmuid Collins, said no payment was made to acquire the IMI, which became a wholly-owned subsidiary company.
But UCC bought IMI’s 13-acre campus, in Sandyford, for €20m. It is being leased back to IMI to help service the borrowings made for the purchase.
Mr Collins told the PAC that UCC had not taken on any pension liabilities, as part of last November’s deal.
But the details of how that was possible have only now emerged in follow-up correspondence between UCC president, Professor Patrick O’Shea, and the committee.
The IMI closed its defined benefit pension scheme in 2012 and removed from its balance sheet all future liabilities associated with pensions for staff, pensioners, and deferred pensioners.
In return, the pension trustees were given an interest, similar to a bank’s charge, in the campus.
The sale of the campus allowed IMI to discharge this interest, and resulted in €13.2m being paid to the trustees.
“As a result, going forward, UCC now has full title over the Sandyford campus, has an agreed financing model to service the borrowings associated with the purchase and, most importantly, does not have any liability for the IMI pension fund,” Prof O’Shea wrote.
The balance of the €20m, along with €1.4m of IMI’s own cash, was used to fully discharge loans and interest totalling €8.1m owed by IMI to AIB bank. It had borrowed to develop a housing complex on the campus, the PAC was told.
UCC also agreed, in the takeover transaction, to invest €2.5m in the Sandyford campus, over a number of years, for the refurbishment and updating of facilities.
The IMI was not considered a viable operation, when consideration of the takeover was being examined by a number of government departments in 2010 and 2011.
It had operational losses of €3.2m and €5.4m in 2009 and 2010, respectively, with debts of €8m in early 2011.
A turnaround in IMI revenues is believed to have been behind the renewed efforts to formalise the acquisition two years ago.
IMI offers executive courses, from short courses up to masters qualifications, in business and management.
The IMI acquisition comes in tandem with the continuing expansion of UCC’s Cork University Business School (CUBS).
As well as paying €1.4m for the former Cork Savings Bank, on Lapp’s Quay, last year, as a flagship facility for CUBS — more than double the €600,000 paid for the property by Cork City Council in 2014 — UCC is seeking another city centre site on which to develop the business school.
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