The combined company, which will be called Raytheon Technologies Corp., will have to deal with how to approach its $90 billion-plus in retirement plan assets, a staggeringly high number that represents the most retirement plan assets to result from any corporate merger.
Robin Diamonte, chief investment officer of Farmington, Conn.-based UTC, would not comment on the merger, but said in an email that the company has had two significant integrations into its defined benefit and defined contribution plans in the past. Its 2012 acquisition of aircraft-components maker Goodrich Corp. and its 2018 acquisition of aerospace company Rockwell Collins added about $5 billion and $8 billion in retirement assets in those deals, respectively.
"In both cases, you start by looking at the combined liability profile of two companies, then understand the priorities of the sponsor (cash flow, pension expense, volatilities, debt threshold levels, etc.) and then build a suitable asset allocation policy," Ms. Diamonte said. "Once you have the policy, you decide on the best investment managers from the two funds and reallocate. In the past we have used a transition manager to help reduce market impact and minimize costs."
Using that process, Ms. Diamonte and her staff were able to merge both Goodrich and Rockwell Collins' DB and DC plans into UTC's plans within several months of the closing of those acquisitions.
Whether UTC and Waltham, Mass.-based Raytheon's plans will merge or remain separately managed remains to be seen. According to the companies' June 10 joint news release, the deal is expected to close during the first half of 2020, pending shareholder and regulatory approvals. Some shareholders, including Pershing Square Capital Management CEO William Ackman, have expressed concern regarding the deal.
As of Dec. 31, Raytheon Co. had $25 billion in defined benefit plan assets, according to the company's most recent 10-K filing, and as of Dec. 31, 2017, the company had $19 billion in defined contribution plan assets, according to its most recent 11-K filing.
As of Sept. 30, United Technologies Corp. had $26 billion in defined benefit plan assets and $24 billion in defined contribution plan assets, according to Pensions & Investments data.