Phoenix Home Life Mutual Insurance Co.'s increased buyout price of Phoenix Investment Partners of Hartford, Conn., from $12.50 to $15.75 a share, may not have been enough to stop a class-action lawsuit filed against both firms, according to E.F. Goulart, a spokesperson for Phoenix Investment Partners.

"Those matters are still in litigation," said Goulart. He declined to comment further. Attorneys for both sides also declined comment on the matter.

On July 25, a day after Phoenix Home Life, also of Hartford, tendered its initial $12.50 a share offer, five separate shareholder complaints were filed in Delaware's Chancery Court against both firms claiming the buyout price was too low. The complaints seek permission to file a class action suit on behalf of all minority shareholders of Phoenix Investment Partners as well as an injunction prohibiting the buyout of Phoenix Investment Partners, according to a copy of one of the complaints.

Phoenix Home Life's initial offer price also prompted Tweedy, Browne Company of New York, Phoenix Investment Partner's third largest minority shareholder, to retain Wolf Popper LLP, a New York law firm that specializes in shareholder rights. Tweedy, Browne retained Wolf Popper because of its disappointment with Phoenix Home Life's initial offer, the company announced Aug. 11. So far, it appears that Tweedy Browne has taken no legal action in the matter. Attorneys from Wolf Popper did not return calls.

Because Phoenix Home Life has a nearly 60 percent stake in Phoenix Investment Partners, it is impossible to get the free market value for the firm, the complaint said.

While the $15.75 a share offer is a 26 percent increase from the initial offer, shareholders could receive considerably more if Phoenix Home Life did not own 58 percent of Phoenix Investment Partners' shares, said Bruce Brewington, an equity analyst with Putnam Lovell Securities of San Francisco.

"They don't have to pay a control premium because they already own a controlling interest," he said. A control premium can drive the acquisition price of a financial service firm up by nearly 30 percent of the market price, he said. For instances where control is not at stake, $15.75 a share is in line with market prices, but may be a little low, Brewington said.

A special committee of independent directors from Phoenix Investment Partners was appointed, shortly after the initial offer, to review Phoenix Home Life's initial offer. Those directors include John T. Anderson, Glen D. Churchill, James M. Oates, Donna F. Tuttle, Ferdinand L. J. Verdonck and David A. Williams. All of the company's directors are named in the complaint as defendants.

It is likely that the directors were advised by a group of bankers who compared the price with comparable deals, Brewington said. Phoenix Investment's price is constrained by the fact that not all businesses owned by Phoenix Investment Partners are growing, he said.

While the firm's wealth management and separate-account businesses are booming, the firm's fund and consulting businesses are not doing very well, he said.

"They are not firing on all cylinders by any stretch of the imagination," he said.

Phoenix Home Life probably increased its offer price as much as it did because its plans to de-mutualize and go public next year are contingent upon gaining full ownership of Phoenix Investment Partners, he said.

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