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Pacific Mutual, Thomson Merge Units Into $70-Billion Giant : Investing: It will provide Newport Beach-based PIMCO a platform from which to launch mutual funds for small customers.


Pacific Mutual Life Insurance and Thomson Advisory Group made it official Wednesday, announcing they will merge Pacific Mutual's huge investment management business known as PIMCO with Thomson to create a $70-billion organization.

The deal, first rumored a week ago, will provide Newport Beach-based PIMCO with a new platform from which to launch mutual funds for small investors--a lucrative market that PIMCO has served in only limited ways until now. Most of PIMCO's business is institutional.

William Thompson, PIMCO's chief executive, confirmed that while the company has no plans to diminish services to its many institutional clients, "we think the retail marketplace is a very attractive one." That could include products designed for retirement savings programs, such as 401(k) plans, he said.

Because Stamford, Conn.-based Thomson Advisory is a limited partnership whose shares, or units, trade on the New York Stock Exchange, the deal also allows PIMCO executives and Pacific Mutual to liquefy their substantial investment in PIMCO. Shares of the merged entity will continue to trade on the NYSE.

"This ensures the longevity of the company by allowing us to offer equity to many of our professionals," said William Gross, a PIMCO managing director who is considered one of the nation's savviest bond investors. "Before, we never had the possibility of owning part of our own company."

Under the merger agreement, the 4.3 million Thomson Advisory units held by the public will become Class A units of the new operation, to be named PIMCO Advisors L.P. (limited partnership). Pacific Mutual and PIMCO managers will receive 12.35 million Class A units and 12.35 million Class B units in the new PIMCO Advisors.

In addition, Pacific Mutual and PIMCO managers will jointly become the general partner of the new entity by buying a controlling interest in Thomson's current general partner for about $140 million. That stake is held by venture capital firms that helped bankroll Thomson.

Thomson currently manages $11.6 billion in nine mutual funds and in private accounts, while PIMCO has about $60 billion under management, including 11 mutual funds. But PIMCO's funds have $500,000 minimum investment requirements.

PIMCO officials said they contemplate no major staff changes in Newport Beach or Stamford.

Thomson Advisory units on the NYSE soared $3.50 to $38.25 on Wednesday, suggesting that Wall Street is happy with the deal.

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