NEW YORK - If history is any guide, the combined pension fund that results from the proposed Pfizer Inc. acquisition of Pharmacia Corp. may not mirror Pfizer's current $3.3 billion defined benefit plan.
Pfizer's $60 billion deal to acquire Peapack, N.J.-based Pharmacia, which was announced last month, is expected to close by the end of the year upon regulatory approval.
Officials at both companies declined to comment, but sources familiar with the situation recalled that after New York-based Pfizer acquired Warner-Lambert Co. in 1999, the best practices of both funds were reviewed and retained, including indexing some equities.
Normally, the head of pension investments at the acquiring company is appointed to run the merged pension plan. However, after Pfizer merged with Warner-Lambert, Sharon Kinsman, director of pension investments at Warner-Lambert, became assistant treasurer of Pfizer, where she still oversees the $9.55 billion in total pension assets (including $6.2 billion in Pfizer's defined contribution plan). The sources noted that when the pension funds integrated, the staffs combined as well, "in a friendly merger."
Currently, Patricia Haverland is the senior director, pension investments at Pharmacia, which had $1.19 billion in defined benefit assets and $1.43 billion in defined contribution assets as of June 30, 2000, according to the 2002 Money Market Directory. Ms. Haverland did not return calls seeking comment.
Assets to Monsanto
Pharmacia this month announced it would spin off its remaining 86% stake in Monsanto Co. As a result, some of those pension assets will go to Monsanto and not Pfizer, although exactly how much could not be ascertained. Rebecca Hayne, spokes-woman for Hewitt Associates, Lincolnshire, Ill., Pharmacia's actuary, said she couldn't comment on client activities. Buck Consultants' Larry Rothweiler, actuary for Pfizer, also declined to comment.
Asset allocations of the defined benefit plans are quite different.
As of Sept. 30, 2001, according to data from Pensions & Investments, Pfizer had 50.1% of assets in domestic equities, with 8.2 of that Pfizer stock, and 11.7 percentage points in international equities. As of June 30, 2000, the latest figures available for Pharmacia, the firm had 55% in domestic equities and 15% in international equities. Pfizer had 13.6% of assets in private equity; Pharmacia had none. Pharmacia had 5% in equity real estate, while Pfizer had only 0.5%. Pharmacia has 25% in domestic fixed income; Pfizer had 23.3%. Neither had investments in mortgages or international fixed income. Pfizer had just 0.8% in cash, while Pharmacia had none.
Both plans use Barclays Global Investors to manage their passively managed equities, and J.P. Morgan Fleming - Pfizer for alternatives; Pharmacia for real estate and bonds. Otherwise, the two plans' manager rosters differ completely.
The two defined contribution plans are dissimilar also and there is no overlap in managers. Pfizer had 82% of assets in its company stock, while Pharmacia had 37% in company stock. Pfizer had another 11% in additional equity investments, with only 3% in fixed income and 3% in stable value; Pharmacia had 47% in mutual funds and 16% in stable value.