Buyout by Pacific Investment Wins Analysts’ Praises : Acquisition: With control of Thomson Advisory Group, firm can enter mutual fund industry.

Investment analysts on Thursday praised the proposed buyout of a New England money manager by Pacific Investment Management Co. as a shrewd maneuver that will thrust the Newport Beach firm into the lucrative mutual fund industry.

“It’s a very smart diversification move for those guys,” Walter W. Cruttenden III, head of Irvine brokerage Cruttenden & Co., said of Pacific Investment’s management.

Pacific Investment, known as PIMCO, is a subsidiary of Pacific Mutual Life Insurance, California’s largest life and health insurance company based on assets.

“I certainly wouldn’t bet against them,” Cruttenden said.

Pacific Mutual announced Wednesday that it signed an agreement to merge PIMCO and four of its divisions with Thomson Advisory Group of Stamford, Conn.

The deal, expected to be completed by summer, will create a powerhouse in the bond and mutual fund markets, managing assets worth about $70 billion, experts said. The transaction requires the approval of Thomson shareholders as well as state and federal regulators.

The new firm, to be called PIMCO Advisors L.P., will be a publicly traded company listed on the New York Stock Exchange.

PIMCO Chief Executive William Thompson said that the money management firm, which has long specialized in selling bonds to institutional holders, had been considering ways--including acquisitions and having its own public stock offering--to get an inroad into the equity market. “We had discussed many ideas,” Thompson said.

In the end, the company chose Thomson after months of discussions with officials of its parent, Pacific Mutual, and other prospective buyout candidates.

PIMCO decided on Thomson in part because it is already a publicly traded company and would save PIMCO the expensive procedure of an initial stock offering. But more important, Thompson said, Thomson is well-known for selling mutual funds to small investors, an untapped market for PIMCO.

The New England firm also has expertise in selling and managing 401-k retirement plans, a market that investment analysts consider lucrative.

The agreement is a fair deal, analysts said. Pacific Mutual will pay $140 million to venture-capital groups for a controlling stake in Thomson. The new company will then issue 24.7 million shares--12.35 million in Class A stock and 12.35 million in Class B stock.

That means the 10 top managers of PIMCO would each control blocs of stock worth millions of dollars--PIMCO officials would not say Thursday exactly how much those personal stakes would be worth.

Thompson pointed out that insiders who hold Class B shares would not be able to trade them until 1997.

Other holders of Thomson stock will receive Class A shares in exchange for the Thomson shares they now own.

In Thursday’s trading on the New York Stock Exchange, Thomson’s stock rose $1 a share to close at $39.25.

Michael Lipper, president of Lipper Analytical Services Corp. in Summit, N.J., said he expects the new company performance to ensure positive earnings for all shareholders.

“I think you are marrying a good bond manager with a good equity manager,” Lipper said. “And now they can start to put together a good, solid program.”

PIMCO, founded in 1971, has a long record of positive performance. Through its institutional customer base, it has grown to manage $54.3 billion in assets.

PIMCO’s Total Return Fund, for instance, has had a 12.5% net return in 1993, 13.9% for the past three years and 12.8% for the past five years. That compares to the Lehman Brothers’ Aggregate Bond Index of 9.8% for the last year, 11% for the past three years and 11.3% for the past five years.

Lipper said he also expects good results from PIMCO’s entry into the equity market.

More important, he said, PIMCO’s transformation into a public company will inspire its employees. “They will now start to get a stock market valuation on their work,” he said.

Though some analysts have said recently that the long-running bull market may be almost over, William Gross, a PIMCO founder and managing director, said the company’s decision to enter the equity market is neither ill-fated nor ill-timed.

One of the long-range goals of the new firm, he said, is to offer a diverse product line for customers, whether they are large institutional stockholders or small, private investors who are looking for a safe nest for their funds.

“This is something we have been looking to for some time,” Gross said. “Bull markets come to an end all the time. And they come back. It would be shortsighted to make a business decision based on short-term changes in either the equity or the bond market.”