Mutual Fund Powers Benham, Twentieth Century to Merge : Securities: Both firms tout deal. Analysts say similar ones will follow.

Twentieth Century Cos. and Benham Management International Inc., two of the most prominent names in mutual funds, will merge in a deal that could be a harbinger of more consolidation in the industry.

Both companies touted the merger, announced Tuesday, as a powerful melding of Twentieth Century’s reputation for strong stock offerings and Benham’s expertise in bond funds.

“It’s a marriage made in heaven, in that we both bring something radically different to the party,” said Jim Stowers III, Twentieth Century president.

The merger comes as stock and bond funds are trying to recover from a broad downturn in the financial markets, both in the United States and abroad. Funds that invest overseas, particularly in so-called emerging markets such as Mexico, have suffered losses or weaker returns.

The Twentieth Century-Benham deal had been rumored for months. Experts in the mutual fund industry, which has expanded ferociously in recent years, said more deals involving other mutual fund companies may be in the offing.

Kansas City-based Twentieth Century will pay cash and stock to acquire Mountain View, Calif.-based Benham. Details of the deal between the two privately held companies will not be released publicly, Stowers said in a conference call with reporters.

The companies say the deal is the largest ever between two families in so-called no-load funds, which do not require upfront sales charges. The merged company, whose name has not been determined, would be the nation’s fifth-largest family of no-load mutual funds, with more than 60 funds and more than $37 billion in assets under management.

The agreement requires approval by regulators and by the companies’ shareholders and trustees. The deal is expected to be completed by June.

Twentieth Century has built a reputation on its aggressive equity funds, but its bond offerings have struggled. Ninety-three percent of its $26.2 billion in assets are in its stock funds.

Benham’s strength is in bond funds, where it has 90% of its $10.7 billion in assets. Its stock funds have been “somewhat inadequate,” Benham founder and Chairman Jim Benham said.

According to John Rekenthaler, editor of the Morningstar Mutual Funds newsletter, merger talk in the fund industry has increased since last year, when a Goldman, Sachs & Co. report said a fund company needs at least $10 billion in assets to be competitive.

“Twentieth Century is looking up and saying, ‘We can get from Point A to Point B with one trick, but if we want to get to Point C and be one of the Top 10, we need to be a supermarket,’ ” Rekenthaler said.

Besides expanding its bond fund offerings through the deal, Twentieth Century may pick up some investors by increasing its exposure nationwide. Most of the company’s investors now come from the Midwest, said Kim Rebecca, a Morningstar analyst.

Although the merger might result in duplicate administrative functions, no layoffs are planned.