Pimco Advisors Holdings, one of the world's largest bond managers, agreed Sunday to sell 70% of the company to Europe's second-largest insurer in a $3.3-billion deal that is likely to spur similar marriages between U.S. and foreign financial giants.
Ending months of speculation, Newport Beach-based Pimco said it signed a definitive agreement to sell majority ownership to Munich, Germany-based Allianz for $38.75 a unit in cash, valuing the entire company at $4.7 billion.
The combined companies, to be based in Munich, would have about $650 billion in assets under management and about 107,000 employees worldwide. The deal--subject to regulatory and shareholder approval--is expected to be completed by March.
The purchase is the latest example of global consolidation in the financial services industry, analysts said.
"The global market offers tremendous potential," said Philadelphia mutual fund consultant Burton Greenwald, who predicted similar cross-border deals will follow the Pimco-Allianz merger.
Both Pimco and Allianz, which began merger discussions last year, have been actively seeking international partners to boost their sales worldwide.
"This will give us access and experience in 68 countries," said Ernest Schmider, Pimco's chief administrative officer.
For Pimco, the Allianz deal fast-tracks the company's diversification away from the maturing U.S. market and provides a deep-pocketed parent that can help it sell products around the world. During the next five years, Pimco Chief Executive William Cvengros has said he would like to boost the amount of money the company manages on behalf of non-U.S. clients from about 6% of total assets to 20%. Currently Pimco manages about $256 billion.
As growth in the U.S. mutual fund market begins to slow, investment companies increasingly are turning to untapped markets abroad, particularly with the privatization of large pension funds in Europe and elsewhere, according to Greenwald, head of B.J. Greenwald Associates. Teaming with Allianz puts Pimco in a better position to pick up some of that business, he said.
For its part, Allianz gets a well-respected U.S. bond manager that will serve as a foothold for expansion in the U.S. A key attraction is Pimco's fixed-income unit, Pacific Investment Management Co., which accounts for about two-thirds of the company's assets, and its industry-leading Total Return Fund, run by Bill Gross.
