CalPERS contacts Permira over plant closure

The California Public Employees’ Retirement System has sent a letter to Permira addressing the firm’s plan to close a Hugo Boss plant in Ohio, saying the pension “takes this matter seriously”.

“Our primary focus with Permira is the performance of the fund, but we wanted some reassurance that the decision to close the Hugo Boss plant that would end US jobs was right for the fund,” a CalPERS spokesperson told sister news service PrivateEquityOnline in an emailed statement.

CalPERS has invested about $610 million with Permira since 1991. The firm’s latest fund, Permira European Fund IV, which closed in 2006, has a -36.6 percent internal rate of return as of 30 September, 2009. The pension committed $347 million to the fund, and about $208 million has been called.

Permira’s plan to shutter a Hugo Boss production plant in Brooklyn, Ohio, ending at least 300 jobs, has been met with consternation by workers’ unions, pensions and public officials in Ohio. The city of more than 11,000 people will lose $120,000 in annual income tax revenue once the plant closes. The plant is scheduled to close in April.

The $50 billion Ohio Public Employees’ Retirement System sent a letter to Permira saying it has “concerns about future involvement” with the firm.

The plant’s employees, as well as local and state officials, claim Hugo Boss did not “bargain in good faith” to keep the plant open. OPERS demanded that Permira return to negotiations to find a way to keep the plant open.

Workers United represents employees at the plant, and the union has vowed to contact public pensions in other states – including Pennsylvania, new Hampshire, Texas, California and Massachusetts – to ask them to re-evaluate investments in Permira.

CalPERS sent its letter in response to communications between the pension and Workers United, according to the letter. The pension, the largest in the US with more than $200 billion of assets, requested Permira get in touch with the union “to discuss the concerns”.

OPERS, in its letter to the firm, also questioned the performance of Permira’s latest fund.

“The OPERS board noted that the investment performance of Permira IV has underperformed our expectations and is inconsistent with the reputation of your institution,” OPERS chairman Ken Thomas and chief executive officer Chris DeRose said in the letter, dated 25 February.

Permira has said it is “sensitive to our investors’ concerns and always have an open line of communications with them”, but has declined to comment further. Hugo Boss told PEO in a prior interview it has done everything possible to make the facility competitive, “and when that effort failed, we acted in the best interests of shareholders and customers by deciding to close the facility”.

The company said it has worked with public officials and a separate, maintenance workers' union, to provide “fair severance packages and other traditional assistance to the workers”. The production workers union rejected the company’s offer to engage in similar dialogue, the company said.