Pacific Mutual, Thomson Advisory Group Holding Talks on Possible Merger
Pacific Mutual Life Insurance Co. said Monday that it is discussing a possible merger of much of its investment business with that of Thomson Advisory Group L.P., a Connecticut mutual fund manager with about $11 billion under its control.
The deal would create a $70-billion portfolio, about $60 billion of it coming from several Pacific Mutual subsidiaries.
For the record:
12:00 a.m. March 4, 1994 For the Record
Los Angeles Times Friday March 4, 1994 Orange County Edition Business Part D Page 2 Column 1 Financial Desk 1 inches; 35 words Type of Material: Correction
Life insurance--A story Tuesday incorrectly ranked Pacific Mutual Life Insurance Co. in Newport Beach. It is the state’s largest insurer based on assets, but Transamerica Occidental Life had $275 billion of life insurance in force at the end of 1992.
Officials of the companies would not comment further after making a joint announcement of the negotiations. But investment industry analyst Michael Lipper suggested that the deal might be an effort by Pacific Mutual to take its investment services operation public through a merger with Thomson.
Apparently the talks are aimed at pushing most, if not all, of Thomson’s investment advisory business onto Pacific Mutual’s plate. But Thomson, a limited partnership whose shares are traded on the New York Stock Exchange, would keep its master limited partnership status and NYSE listing, a spokeswoman for the company said.
Thomson, which has a steady history of profitability and posted a profit of $24.2 million for 1993, manages the $5-billion Thomson McKinnon mutual funds through its mutual funds group and about $6 billion in institutional and individual assets through its Columbus Circle Investors subsidiary.
It was unclear whether the merger discussions anticipate creation of an entirely new business or whether the combined funds would be handled under the auspices of one of half a dozen Pacific Mutual subsidiaries that would contribute to the portfolio.
“We only have a quarter, or maybe half, of the puzzle,” Lipper said. Both companies have good reputations and names that help their sales forces market their services, he said. But Thomson “is too small when the (investment management) business gets rougher to maintain a strong effort.”
A pumped-up company with a $70-billion portfolio would have a lot more muscle to flex.
Pacific Mutual would likely be the controlling element, with a controlling 40% stake if its share of the combined portfolios translates as its ownership share. About 43% of Thomson’s 10 million partnership units are publicly traded. The company’s shares closed Monday at $35.25 a unit, up $2.88 on news of the merger talks.
The Pacific Mutual investment subsidiaries manage $74 billion in assets, including about $60 billion for outside investment clients. Pacific Investment Management Co. is a major fixed income assets manager; Cadence Capital, Parametric and NFJ Investment Group manage U.S. equity accounts for the company and its clients--mainly government and corporate pension funds; and Blairlogie Capital manages international portfolios.
Pacific Mutual is California’s largest life insurance company, with more than $40 billion in insurance in force at the end of 1992--the latest year for which financial and performance data for the company are available. The company reported $2.5 billion in revenue for 1992.
