LONDON (CNNfn) - German insurer Allianz said Monday it has moved a step closer to matching its European rivals' spread of businesses by paying $3.3 billion for a 70 percent stake in U.S fund manager Pimco Advisors.
The long-expected deal finally gives Europe's second-largest insurer a strong foothold in the world's largest investment market.
California-based Pimco brings some $250 billion in funds to Allianz's current $360 billion fund management portfolio. The California-based company is one of the leading fund managers in the United States, particularly in its bond management operation.
The move puts the Munich-based insurer on level terms with its two main European rivals, Axa of France and Anglo-Swiss group Zurich Financial Services. Both already have a strong presence in the U.S. market, Axa through Alliance Capital and Zurich through Scudder Kemper Investments.
"A joint venture with Pimco represents a decisive step forward in our strategy of establishing asset management as our third core business," Allianz CEO Henning Schulte-Noelle said.
The acquisition values Pimco at $4.7 billion, which puts the price right in line with market expectations early last month, when Allianz confirmed it was in advanced talks with Pimco.
Analysts said a major sticking point in the negotiations was structuring a deal to accommodate Pimco's tax efficient status. One industry source indicated to Reuters that the structure of the acquisition would significantly cut the cost of the all-cash deal for Allianz.
"Most of the consideration is tax-deductible because of the partnership structure of Pimco, which will [now] be converted to a limited liability company. The tax feature will make it very advantageous for Allianz," the source said.
The transaction is expected to be completed by the first quarter of 2000. Operationally, Pimco will take over responsibility for the group's fixed income activities under the umbrella of Allianz Asset Management.
Allianz board member Joachim Faber will head a new executive committee for asset management with Pimco's chief executive Bill Thompson as his deputy.
Allianz confirmed Pimco managers will retain their autonomy in their investment decisions and said that was a key issue in negotiations. "It's been guaranteed for Pimco and . . . we'd be foolish, having such a team, to do otherwise, an Allianz spokesman told Reuters.
The German insurer also said it had created an incentive program for Pimco fund managers, with the aim of holding on to them for at least seven years.
-- from staff and wire reports