Updated on March 1
Acquisitions by Coca-Cola Co. and PepsiCo Inc. will impact a combined $21.5 billion in estimated retirement assets and combined, the companies plan to make $1.1 billion in pension contributions this year.
Coca-Cola’s $12.2 billion acquisition of Coca-Cola Enterprises Inc.’s North American business will affect $6 billion in defined benefit assets and an estimated $2.9 billion in defined contribution assets. It includes the assumption of Coca-Cola Enterprises’ $580 million in accumulated benefits obligations for North America, according to a Feb. 25 joint statement from both Atlanta-based companies that announced the deal.
Coca-Cola Enterprises had a total accumulated benefit obligation of $3.4 billion, according to its 10-K report filed Feb. 26. A breakout of the assets related to pension liabilities wasn’t available.
The companies expect the deal to close between October and December. Coca-Cola currently owns 34% of Coca-Cola Enterprises, which Coca-Cola will exchange as part of its purchase.
Coca-Cola’s U.S. defined benefit plans have a total of $1.97 billion in assets and its non-U.S. plans $1.05 billion, both as of Dec. 31. Coca-Cola Enterprises had $2.96 billion in defined benefit assets, as of Dec. 31, according to its 10-K filed Feb. 12.
In defined contribution assets, Coca-Cola has $1.57 billion and Coca-Cola Enterprises $1.33 billion, according to Pensions & Investments estimates.
Coca-Cola’s U.S. plan had at least 39% in domestic equity, 7.8% in international equity, 20% in fixed income, 4.1% in hedge funds and limited partnerships, 5.4% in real estate, 8.5% cash, and the rest in other investments, according to its 10-K filed Feb. 26. The other includes 13% in funds that include equity and fixed income that the company didn’t break out.
Coca-Cola Enterprises had 38.4% in international equity, 18.7% in U.S. equity, 24% in fixed income, 5% in private equity, 4.3% in hedge funds, 4.4% in real estate, 1% in infrastructure, 0.7% in timber and the rest in other assets.
The two plans have few overlapping defined benefit managers, according to the 2009 Money Market Directory. Of the managers they share, they both use J.P. Morgan Asset Management for fixed income and real estate. Coca-Cola also uses J.P. Morgan for international and emerging markets equities. Coca-Cola uses New Star International Managers Ltd for international bonds, while Coca-Coal Enterprises uses New Star for international equities.
Meanwhile, PepsiCo’s $3.9 billion acquisition of Pepsi Bottling Group Inc. and PepsiAmericas Inc. will impact $8.64 billion in defined benefit assets and an estimated $4 billion in defined contribution assets.
Pepsi on Feb. 26 completed its acquisition of the 50% each of Pepsi Bottling and PepsiAmericas it does not already own, PepsiCo announced in a statement Feb. 26.
Purchase, N.Y.-based PepsiCo had $5.42 billion in U.S. defined benefit assets and $1.56 billion in international defined benefit assets, as of Dec. 26, according to its 10-K, filed Feb. 22. It had $3.2 billion in defined contribution assets, according to a P&I estimate.
Somers, N.Y.-based Pepsi Bottling had $1.49 billion in defined benefit assets, as of Dec. 26, according to its 10-K filed Feb. 22. It has $807 million in defined contribution assets, according to a P&I estimate.
Minneapolis-based PepsiAmericas had $171 million in defined benefit assets as of Jan. 2, according to its 10-K, filed Feb. 22. A recent amount of PepsiAmericas’ defined benefits assets weren’t available.
A comparison of the investment managers was unavailable.
PepsiCo’s U.S. defined benefit fund has no alternative investments. As of Dec. 26, 29.8% of fund assets were in U.S. equity, 15% in international equity, 6.1% PepsiCo stock, 39.8% in fixed income, and the rest in cash and contracts with insurance companies.
Pepsi Bottling defined benefit assets were 34.8% in U.S. equities, 30.1% in international equities, 30.4% in fixed income, and the rest in cash and group annuity contracts.
PepsiAmericas’ defined benefit fund had 53% in U.S. equities, 15% in non-U.S. equities, 26% in fixed income and the rest in cash, according to its 10-K.
In terms of defined benefit contributions planned for 2010:
• PepsiCo plans to contribute about $700 million, according to its 10-K. It didn’t break out amounts for its U.S. and non-U.S. plans. In 2009, PepsiCo contributed $1.04 billion to its U.S. plans and $167 billion to its non-U.S. plans.
• Pepsi Bottling plans to contribute $132 million, according to its 10-K. Last year, it contributed $229 million. A forecast for 2010 contributions wasn’t available.
• PepsiAmericas gave no contribution projection for 2010 in its 10-K.
• Coca-Cola plans to contribute $73 million, primarily to its non-U.S. plans, according to its 10-K, which wasn’t more specific. In 2009, it contributed $269 million, of which $175 million was for its U.S. plans.
Coca-Cola Enterprises plans to contribute $150 million to its U.S. plans and $50 million to its non-U.S. plans, according to its 10-K. In 2009, it contributed $322 million to its U.S. plans and $152 million to its non-U.S. plans.
In terms of contributions to defined contribution plans, according to the companies’ 10-Ks:
•PepsiCo contributed $72 million in 2009 and $70 million in 2008.
• Pepsi Bottling contributed $42 million in 2009 and $29 million in 2008.
• Coca-Cola contributed to its U.S. plans $27 million in 2009 and $22 million in 2008 and to its non-U.S. plans $36 million in 2009 and $20 million in 2008.
Coca-Cola Enterprises contributed $39 million in 2009 and $26 million in 2008.
Information on how the acquisitions will affect contributions plans was unavailable.
Coca-Cola moved to a cash balance plan effective Jan. 1, 2010. Pepsi Bottling closed its plan to new hires in 2007 and froze it for existing participants, with certain exceptions, in 2009. PepsiAmericas froze its defined benefit plan in 2001.
Brett Taylor, manager-treasury operations and capital markets at Coca-Cola; Belinda Brady, corporate director-global retirement plan investments at Coca-Cola Enterprises; and Marlene Forrester, senior treasury managers-pension at PepsiCo, couldn’t be reached for comment. A Pepsi Bottling representative also couldn’t be reached.