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Phoenix Cos. Will Buy 60% of Kayne Anderson

Mergers: Deal is part of trend as smaller money-management firms find it difficult to compete with giants.

November 13, 2001|Times Staff Reports

In the latest example of the rapid consolidation of the money-management business, veteran Los Angeles investment firm Kayne Anderson Rudnick Investment Management is selling a majority stake to a unit of Phoenix Cos., the two companies said Monday.

The deal will make Kayne Anderson part of a money-management giant that includes Phoenix Life Insurance Co., Pasadena-based investment manager Roger Engemann & Associates and the Phoenix Charter Oak Trust Co.

Kayne Anderson, based in Century City, manages more than $7billion in assets for high-net-worth and institutional investors as well as for small investors through a family of mutual funds.

The company was formed 17 years ago by Richard A. Kayne and John E. Anderson. Kayne, the firm's chief executive, started in the investment business as an analyst at brokerage Loeb Rhodes Inc. in New York in the 1960s. Anderson, the firm's chairman, is an attorney, entrepreneur and investor. The Anderson School at UCLA is named for him.

Allan Rudnick, the firm's president, joined the company in 1989.

Phoenix Investment Partners, the asset-management arm of Phoenix Cos., will buy 60% of Kayne Anderson for an undisclosed amount of cash. The deal provides for Phoenix Investment Partners to raise its stake to 75% by 2007. The remaining ownership interest will be kept primarily by Kayne Anderson executives and fund managers, the firms said.

Hartford, Conn.-based Phoenix Investment Partners manages about $55 billion in assets.

Smaller money-management firms have increasingly found it difficult to compete with industry giants, helping to drive a wave of consolidation in recent years.

But merger terms often allow for existing management of a target firm to continue running the business. Phoenix said Kayne, Rudnick and other officers have signed long-term employment contracts.

Kayne said the agreement will allow the firm "to maintain our distinct culture and investment philosophy." The company describes its stock-and bond-picking strategy as "quality at a reasonable price."

Phoenix Cos., founded in 1851, went public in June, when it sold 49 million shares at $17.50 each. The stock (ticker symbol: PNX) has struggled since the offering. It closed Monday at $14.02, up 22cents, on the New York Stock Exchange.

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