Pimco to Buy Major Stake in Oppenheimer

By JOHN O’DELL

Feb. 15, 1997 12 AM PT

TIMES STAFF WRITER

NEWPORT BEACH —

Pimco Advisors LP said Friday that it agreed to acquire a major stake in Oppenheimer Capital LP, a large manager of stock-based investment funds, in a deal that would make one of the nation’s largest money managers even larger.

The $265-million purchase would give Pimco broad access to the hot equity market, which last year eclipsed the bond fund market in which the Newport Beach firm has long specialized. Pimco would become managing general partner of the stock fund.

Pimco said it would issue $233 million in preferred stock to closely held Oppenheimer Group Inc., and assume $32 million in debt in return for the New York investment group’s 33% interest in Oppenheimer Capital. The remaining shares of Oppenheimer Capital would be publicly traded.

About 73% of the $110 billion in assets managed by Pimco is in bond funds, while about 80% of the $48 billion managed by Oppenheimer Capital is invested in stocks.

“This is a significant increase in our asset base and it balances our asset mix,” said William Cvengros, Pimco Advisors chairman and chief executive.

In 1996, investors gobbled up a record $223.3 billion in stock funds while pumping just $13.8 billion in new money into the nation’s bond funds, but Cvengros said he expects momentum to start swinging back toward a preference for bond funds “in the next 18 to 24 months.” The Oppenheimer Capital acquisition, he said, would give Pimco the ability to do well at all points on the pendulum.

The transaction would also give Pimco access to new retail marketing channels and to investment clients that have not been interested in its bond-based products. There is little overlap in the two companies’ client list, Cvengros said.

Oppenheimer’s stock funds could also provide Pimco with equity market products to sell to small investors as it continues increasing the accessibility of its programs, he said.

Both companies now manage money for primarily large institutional investors such as pension funds that typically invest in multiples of $1 million. In recent months, though, Pimco has opened a number of its funds to individual investors who can buy in for as little as $1,000. Cvengros said Pimco would consider opening up some of the Oppenheimer Capital funds in the same way.

As part of the deal, Pimco will also acquire the stock of Advantage Advisers, an Oppenheimer Group affiliate that manages eight closed-end investment funds with total assets of $1.3 billion.

Cvengros said Oppenheimer Capital would operate as an indirect subsidiary of Pimco Advisors and that its investment personnel and procedures are not expected to change. “We intend to keep the firms separate in terms of day-to-day management.”

The planned acquisition is expected to take up to six months to complete.

Pimco stock closed unchanged Friday at $25.50 per share, while Oppenheimer Capital shares--which rose when word of the deal first broke last month--fell by $1.625 to close at $36.50. Both stocks trade on the New York Stock Exchange.

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Asset Merger

Newport Beach’s Pimco Advisors L.P. has acquired a one-third interest in Oppenheimer Capital L.P. in a bid to increase its equities management business. A look at both companies:

PIMCO ADVISORS

* Headquarters: Newport Beach

* CEO/President: William Cvengros

* Business: Asset management firm

* Assets managed: $110 billion

* Status: Public

* Exchange: NYSE

OPPENHEIMER CAPITAL

* Headquarters: New York

* Chairman/CEO: J.M. La Motta

* Business: Asset management firm

* Assets managed: $48 billion