The proposed combination of American Home Products Corp., Madison, N.J., and American Cyanamid Co., Wayne, N.J., seems likely to result in a pension fund merger as well.
American Cyanamid accepted a $9.7 billion merger agreement that provides for American Home Products to pay its stockholders $101 per share in cash for all outstanding American Cyanamid shares. The merger agreement, which expires Sept. 14, would create a company with annual revenues of more than $12 billion and $2.93 billion in pension assets. American Home Products officials refused to comment for this article.
One beneficiary could be Cyanamid's $441 million 401(k) plan, which is 33% invested in company stock. The American Home Products offer includes a significant premium over the stock's price, which was holding at approximately $60 before the takeover, said Joseph Riccardo, and analyst with Bear Stearns & Co., New York.
American Cyanamid Assistant Treasurer Joseph R. Vidal did not return phone calls.
RogersCasey, Darien, Conn. is American Cyanamid's consultant. Kenneth Rogers, RogersCasey's managing director, marketing and client services, said the funds may remain status quo for a period of months while the merger takes place.
He noted that when NCR Corp. merged with AT&T Corp. the NCR fund remained on its own for nearly a year after the merger, but other plans have dealt with mergers in different ways.
"When these situations occur there are a lot of factors that get involved in how you're going to manage the pension funds," he said. "There's sort of a feeling out period."
According to the 1994 Money Market Directory, American Home Products has $679 million in defined benefit assets under management both internally and with NationsBank, Charlotte; Metropolitan Life Insurance, New York (also its custodian); and J.P. Morgan Investment Management, New York. The asset mix for its largest defined benefit plan, the $585 million U.S. retirement plan, is 67% bonds, 3% mortgages, 12% private placements, 15% indexed equities, 2% real estate and 1% cash.
American Home Products also has $449 million in 401(k) assets invested 62% in GICs and BICs, 33% in pooled equities and 5% in cash.
Its managers include Met Life; New York Life Insurance, New York; Ohio National Life Insurance Co., Cincinnati; and Prudential Asset Management Group, Newark, N.J. Chemical Banking Corp., New York, is custodian.
American Cyanamid has a $1.34 billion defined benefit plan and a $441 million 401(k) plan. The defined benefit plan is invested 20% in indexed equities, 26% in active management equities, 49% in indexed bonds, 3% in international bonds, 1% in venture capital and 1% cash.
The 401(k) is managed by J.P. Morgan Investment Management; it is invested 54% in GICs and BICs, 33% in company stock, 7% in equities, 5% in bonds and 1% in cash.
The combination of both companies could result in the elimination of jobs as the merged company eliminates redundancies in its operations, said Arvind Desai, who follows the industry for Mehta and Isaly Worldwide Drug Research, New York.