The $9.5 billion megamerger between Raytheon Co., Lexington, Mass., and the defense business of Hughes Electronics Corp., Los Angeles, is likely to result in a merger of the two defense companies' pension plans.
It's uncertain when the pension merger will occur, said Raytheon spokesman Robert McWade. "Next month we will start to look at the pension assets and inventory them," he said.
Raytheon had $7.9 billion in employee benefit assets as of Dec. 31, 1996; Hughes had $9.5 billion, according to the 1998 Money Market Directory. But only the defense portion of the Hughes' pension plan assets will be integrated into the Raytheon plan.
The integration of the two pension funds probably will be determined by which company is dominant, said William Cleary, national retirement practice leader at Sedgwick Noble Lowndes Asset Consulting, Inc., Melville, N.Y.
Usually the acquirer, in this case Raytheon, is dominant. "But a lot will depend on how well-funded each plan is. If one of them is underfunded, they will have to be kept separate for a while. But given the record stock market returns of the last couple of years, that may not be a problem."
Mr. Cleary said corporate executives are likely to scrutinize the assets the first year and decide whether it would be better to merge the two plans or to design a new one.
According to Raytheon's annual report for the year ended December 1996, plan assets totaled $4.9 billion; accumulated benefit obligation, $3.7 billion; funding contributions, including pre-payments of $60.7 million made in 1995 and $1.9 million in 1994. No similar information was available for Hughes.
When the pension fund assets are merged, the pension staffs from the two companies are also likely to be streamlined into one, said Ed Loughlin, president of SEI Investments, Oaks, Pa.
One Raytheon money manager said Raytheon officials have not talked to the firm about what effect, if any, the merger will have.
According to Money Market Directory, as of December 1996, Hughes' defined benefit assets totaled $5.5 billion; defined contribution assets, $4 billion.
Raytheon's defined benefit assets totaled $5 billion; defined contribution, $2.3 billion.
Mellon Trust serves as Raytheon's master trustee and Hughes' global custodian, according to MMD. Otherwise, there is no duplication of service providers.
Bankers Trust is Hughes' master trustee. Hughes manages some bond and equity investments internally. Its defined benefit manaers are: Alliance Capital Management; BEA Associates; Bradford & Marzec; Bridgewater Group; Chancellor Capital Management; Dalton, Greiner, Hartman & Maher; Forstmann-Leff Associates; Frontier Capital Management; Hagler, Mastrovita & Hewitt; Heitman Capital Management; Jennison Associates Capital; KR Capital Advisors; Lehman Brothers Global Asset; Magten Asset Management; J.P. Morgan Investment Management; Neuberger & Berman; Oxford Partners; Pareto Partrners; T. Rowe Price; Rowe Price-Fleming International; PRIMECO Capital Management; PRIMECAP Management; PSI Institutional Realty; RCM Capital Management; Reich & Tang Capital Management; The RREEF Funds; TCW Group; UBS Asset Management; Western Asset; Westmark Realty.
Managers for Raytheon's defined benefit plan, according to the 1997 Money Market Directory, are Ariel Capital Management; Bankers Trust; Dewey Square Investors; Invesco Capital Management; Loomis, Sayles; Mellon Trust; PanAgora Asset Management; Paribas Asset Management; Prudential Investments; Richmond Capital; Rosenberg Institutional Equity Management; State Street Bank; State Street Research; STI Capital Management.
