The Pioneer Group Inc., a Boston-based mutual fund company, has signed a letter of intent with Mutual of Omaha Insurance Co. to purchase the insurer's mutual fund management business, Pioneer announced last week.
"We've been looking to acquire assets for some time," Robert L. Butler, president of Pioneer Funds Distributor, the Pioneer Group's mutual fund subsidiary, said of the decision to purchase the insurance company unit.
The acquisition of Mutual of Omaha Fund Management Co. will help to increase the fixed-income assets of Pioneer, which has offered mainly equity funds. The purchase also will boost the number of mutual funds available for sale by Mutual of Omaha agents.
"What it really does for us is it immediately triples the amount of funds that are available for our policyholders," said Terry Calek, vice president of public affairs for Mutual of Omaha. "It seemed a cost-effective way to grow and expand."
Mutual of Omaha would become Pioneer's largest retail dealer, with 2,000 of its more than 4,000 salespeople licensed to sell mutual funds to insurance policyholders. Pioneer funds are currently sold by about 1,200 independent brokers, insurance companies, and banks.
Through Pioneer Funds Distributor, the Pioneer Group offers 18 bond, stock, and money market funds. The firm has more than $8 billion in assets under management. Mutual of Omaha Fund Management Co. has assets of $1.2 billion in six mutual funds and one closed-end bond fund.
Under terms of the tentative agreement, Pioneer will pay $23.5 million, plus contingent payments of up to $3 million in three years, to purchase the investment management subsidiary and for certain consulting services and non-competition covenants, according to Butler.
The proposed sale is subject to a final agreement and the approvals of the boards of directors and shareholders of each of Mutual of Omaha's mutual funds and the board of Mutual of Omaha.
Mutual of Omaha's retail broker-dealer, Kirkpatrick, Pettis, Smith, Polian Inc., is not affected by the sale.
The transaction is expected to take about four to six months to complete. Afterward, all of the funds will be known as Pioneer funds.
The combined company will have more than $9 billion in assets and offer 24 mutual funds and one closed-end fund. This would include five municipal bond funds and one money market fund.
The Pioneer Municipal Bond Fund has assets of $69 million, while the Massachusetts Double Tax-Free Fund and the New York Triple-Tax-Free Fund each have $2 million. The California Double Tax-Free Fund has assets of $3 million and the Pioneer Tax-Free Money Market Fund has assets of $7 million. The Mutual of Omaha Tax-Free Income Fund has assets of $507 million.