Motorola Solutions Inc.'s pension buyout, the third largest in U.S. history, was the fastest by a mile, taking less than six months from start to finish.
The Schaumburg, Ill.-based company's buyout agreement with Prudential Insurance Co. of America will total about $3.1 billion and cover about 30,000 Motorola retirees in its frozen defined benefit plan, the company announced Sept. 25.
In size and scope, it is the third-largest U.S. buyout of its kind after General Motors Co., Detroit, and Verizon Communications Inc., New York, entered into similar buyout agreements with Prudential in 2012.
The company also announced a lump-sum offer to about 32,000 terminated vested participants who have yet to retire from the workforce, to whom Motorola Solutions is offering a lump-sum window beginning Oct. 1 and ending Nov. 7. The payments will be made on Dec. 19.
Overall, the two moves could potentially cut the company's U.S. pension obligations in half.
“I think it started coming together when we decided to divest our enterprise business this year,” Robert O'Keef, Motorola Solutions' corporate vice president and treasurer, said in a telephone interview.
In April, Motorola Solutions announced it had agreed to sell most of its enterprise business, which includes mobile computing, bar-code-scanning technology and local area networking, to Zebra Technologies Corp. The deal is supposed to close by the end of the year.
“This is a company that has gotten smaller over the last decade and a half,” Mr. O'Keef said, “so if you rewind 15 years, the company had $45 billion in sales, six major businesses, (and) 150,000 employees. What we're going to be left with after the divestiture ... is a monoline business with about $6 billion in revenue and about 15,000 employees. And this business is still saddled with a legacy pension.”
Mr. O'Keef said the announcement of the divesture in April was the final step needed before company executives could deal with pension issues. They immediately began working on the buyout, finishing in less than six months a process that typically takes 12 to 18 months.
“The cornerstone principal from a capital assurance standpoint was to maintain our current BBB (credit) rating,” Mr. O'Keef said. “We determined we were able to borrow a billion dollars to shore up the plan, annuitize the retiree portion and offer about $1 billion in lump sums.”