The fate of TRW Corp.'s defined benefit and defined contribution assets is uncertain, pending the Cleveland-based company's acquisition by Northrop Grumman Corp.
Los Angeles-based Northrop Grumman has $13.9 billion in defined benefit assets and $5 billion in 401(k) assets, according to company reports; TRW has a $2.9 billion defined benefit fund and $2.4 billion in 401(k) assets, according to company reports.
The acquisition is expected to be completed in the fourth quarter, pending shareholder and regulatory approval.
Northrop announced plans to divest TRW's automotive group, based in Livonia, Mich., which has 64,000 of TRW's total 93,000 employees. A breakdown of TRW's automotive pension assets wasn't available.
Without any divestiture, the Northrop-TRW combination would rank as the 40th largest U.S. employee benefit fund, with $24.4 billion in total assets.
Top pension post vacant
Northrop's acquisition may provide an opportunity for Robert M. Hamje, president and chief investment officer at TRW Investment Management Co., Cleveland, to head the combined operations. Northrop's top pension investment post has been vacant since Rose Mary Abelson, director-investments and assistant treasurer, left in early May to join WestAM Private Equities, Chicago.
"I can't comment," said Mr. Hamje. He said it is too early in the acquisition process to discuss what would happen with the TRW pension investment staff. He declined to discuss how the pension and 401(k) assets might be combined with Northrop's.
Northrop executives didn't return calls on how the company would combine the TRW pension and 401(k) assets or how the new combined company would structure its pension staff with people from Northrop and TRW.
Northrop has retained Sprague & Associates, Sherman Oaks, Calif., to assist in the recruiting to fill Ms. Abelson's post, according to a human resources official at the defense contractor.
In the interim, Northrop has split up Ms. Abelson's duties among the rest of the pension investment staff, rather than temporarily assigning them to any one person, a pension official said, adding, "We all report now to (Albert F. Myers, vice president and treasurer), as Ms. Abelson did."
Both companies have different structures for overseeing their pension assets. TRW, unlike Northrop, has a separately incorporated pension investment unit, TRW Investment Management.
Company stock holdings
But both companies' pension and 401(k) plans are big holders of their own company stock.
TRW's 401(k) plan is the largest investor in TRW stock, surpassing any institutional investor. Its 401(k) plan had 21.7 million shares, or 17.1% of the total 126.6 million shares of TRW stock outstanding, as of Dec. 31, according to company documents. Coupled with the 4.8 million shares in company stock held by the TRW defined benefit plan, which amounts to 3.8 % of the total shares outstanding, the two plans have 25.5% of all TRW shares outstanding.
The 8.1 million shares of company stock held by Northrop's defined benefit fund, along with the 4 million shares in its 401(k) plan, together amount to about 11.2% of Northrop's total outstanding stock as of Dec. 31, according to company documents.
Northrop's defined benefit plan has an asset allocation of 42% domestic equities (including 5.9 percentage points in Northrop Grumman stock), 27% fixed income, 16% international equities, 8% cash and 7% venture capital and real estate, according to a company report.
TRW's asset allocation is 46.4% domestic equities (including 4.8 percentage points in TRW stock), 21.5% domestic fixed income, 15.7% international equities, 10.4% real estate equity, 2.8% international fixed income, 2.8% cash and 0.4% private equity, according to the company.
Also, Northrop had $488 million in its retiree health care fund, whose allocation is 69% domestic equities, 21% international equities, 6% fixed income, and 4% cash, according to a company report.
TRW had $200 million in its retiree medical care fund, according to a company report. A breakout of its allocation wasn't available.
Shared managers
Among their money managers, according to TRW company reports and the Money Market Directory, both pension funds use: Alliance Capital Management LP for equities; Deutsche Asset Management for emerging market and other international equities and fixed income at Northrop, and for international fixed income at TRW; J.P. Morgan Fleming Asset Management for equities and fixed income at Northrop, and for international fixed income at TRW; Pilgrim Baxter Associates Ltd. for equities; Pacific Investment Management Co. for fixed income at Northrop, and for international fixed income at TRW; and Putnam Investments Inc. for bonds at Northrop, and for international equities at TRW.
Other Northrop pension fund managers, according to the MMD, are:
* Capital Guardian Trust Co.; Credit Suisse Asset Management LLC; Delta Asset Management; Jennison Associates LLC; Martin Currie Inc.; John McStay Investment Counsel; T. Rowe Price International Inc.; Provident Investment Counsel Inc.; Schroder Investment Management North America Inc.; Sit/Kim International Investment Associates; UBS Global Asset Management; U.S. Trust Co of California; Wellington Management Co. and West AM for equities;
* Credit Suisse; Dresdner RCM Global Investors; Fischer Francis Trees & Watts Inc.; Income Research & Management Inc.; and Jennison, for fixed income;
* Forstmann-Leff Associates LLC for private equity; and
* HSBC Asset Management, managing an assignment that wasn't identified.
Other TRW pension fund managers, according to company reports, are:
* State Street Global Advisors and Investment Counselors of Maryland LLC for domestic equities;
* AQR Capital Management LLC; Acadian Asset Management Inc.; Fidelity and SSgA for international equities;
* Hoisington Investment Management Co. for domestic fixed income; and
* DRA Advisors Inc.; Hart Advisers Inc.; RD Properties; and Lend Lease Real Estate Investments Inc.
Both pension funds use Callan Associates Inc., San Francisco, as consultant.
Overlap in 401(k)s
For the companies' 401(k) plans, overlapping managers include: PRIMCO Capital Management Inc., for stable value; and PIMCO for high-yield bonds at Northrop and for broad fixed income at TRW.
Other Northrop 401(k) managers are: Barclays Global Investors; Capital Guardian Trust; Dresdner RCM; and SSgA, all for equities, according to company documents.
Other TRW 401(k) managers are: Fidelity, Pilgrim Baxter and Putnam for domestic equities; and Alliance and Putnam for international equities.
