PMC International, the financially- strapped mutual fund company which was spurned in its proposed merger with Dundee Bancorp of Canada two months ago, has signed a definitive agreement to be acquired by the Ziegler Companies, a financial services holding company based in West Bend, Wisc. Ziegler will pay $3.1 million in cash for PMC.
The deal alleviates the financial problems of PMC while providing Ziegler with access to PMC's more advanced analytical software, accounting and shareholder services.
Both companies sell mutual fund products and services to the same clients including banks, institutional money managers and financial advisers.
"It's a real match," said Sonny Tucker, ceo of PMC International. "We are mirror-image businesses. "Their strengths are our weaknesses. Our strengths are their weaknesses."
"It's a huge leap forward for us," said Dennis Wallestad, chief financial officer for Ziegler. "We have the financial wherewithal and they have the more sophisticated products."
Ziegler is the parent company of GS2 Securities, which has $1 billion in assets under management in custom-designed mutual fund wrap accounts. PMC, based in Denver, Colo., has $2 billion in assets under management and has recently shifted its strategy away from product sales to consulting services. PMC has developed analytical software that helps institutions and financial advisers create customized mutual fund packages for their clients, both institutional and retail.
"PMC has outstanding performance reporting products, more advanced technology, more sophisticated monitoring and a more rigorous method of evaluating investment managers," said Wallestad.
Wallestad said GS2 Securities will integrate the accounting and shareholder services developed by PMC to provide monthly statements with greater detail to its clients. In addition, he said GS2 will develop a marketing plan to alert the financial advisers of the enhanced services that will result from the merger.
"Our challenge is to make PMC a profitable and viable firm," said Wallestad. "We'll take their platform and roll with it. We plan on being much more aggressive. We're getting the benefit of a lot of front-end work performed by PMC. They developed this smooth-running technology of individually-managed wrap accounts with multiple advisers and provide reports on a timely basis.
"Now that financial advisers know that they have our financial backing, they should be more willing to sign on with us." PMC ran into financial difficulty in the mid-1990s and has been seeking a financial partner to remain in business. Earlier this year, it announced a planned merger with Dundee, which intended to put $24 million into PMC. The deal fell through, however, when Dundee decided the match with PMC was not a good one. Dundee, which has its own mutual funds, concluded it would be better to acquire a wholesale distribution sales force to sell its funds rather than a service firm like PMC.
Under the proposed deal with Ziegler, GS2 Securities will acquire all of the outstanding common stock of PMC for $.60 per share and all of the outstanding preferred stock of PMC International for $2.50 per share. Wallestad said he expected the deal to be completed by the end of the year. The total estimated purchase price is $3.1 million, which will be funded with Ziegler's working capital.
While the deal is being completed, Ziegler has agreed to extend a $3.5 million credit line to PMC. Tucker of PMC said the companies have already begun discussing joint marketing efforts.
"You can count on the fact that we'll be a much more effective and noticeable force in the industry," said Tucker.