U.S. Fund Firms Get a Boost From UniCredito

Wall Street on Monday looked at mutual fund companies’ depressed shares with a much more appreciative eye, courtesy of an Italian banking firm’s bid for U.S. fund firm Pioneer Group.

UniCredito Italiano said it will pay $43.50 a share for Pioneer, a 40% premium to the recent price. The deal ends a troubled period for Pioneer, which suffered losses last year and was accused by one major shareholder of poor management.

Pioneer shares rocketed $11.06 to $42.06, pulling up other fund company stocks as well. T. Rowe Price surged $5.11 to $38.13, Franklin Resources rose $1.06 to $32.13 and United Asset Management gained $1.44 to $19.88.

The transaction values Pioneer at 5% of assets, more than twice what Germany’s Allianz paid recently for bond fund manager Pimco Advisors Holdings.

“The price blew away anyone’s expectations,” said Gerard Cassidy, a Portland, Ore.-based analyst with Tucker Anthony Cleary Gull. “It’s apparent that the door has been busted wide open in the financial services industry.”

Last year’s dismantling of the 1933 Glass-Steagall Act made it much easier for banks, insurers and brokers to merge and sell each other’s products.

Some analysts regard the money management business as attractive because it’s less dependent on market fluctuations than stock brokering. Fund clients pay fixed fees based on the amount of money being managed, regardless of whether they’re investing new money, whereas in stock brokering fees are levied on each transaction.

UniCredito has been seeking to boost the assets of its fund unit, EuroPlus Research & Management. The purchase of Pioneer, UniCredito’s first in the U.S., would give the Milan-based company $24 billion in new fund assets.

Still, the question for other U.S. fund firm stocks is whether speculation about potential takeovers can offset the depressant effect of the Federal Reserve’s rate increases on most financial stocks.