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Market Update

Sale of Pioneer Group Narrowly Averts Proxy Battle

Venerable but struggling fund manager Pioneer Group   narrowly averted a contentious shareholder meeting set for Tuesday by announcing Monday it would be sold to Italian banker UniCredito Italiano Group for $1.2 billion in cash.

The meeting had promised to be the site of the next step in a proxy battle between the current board of directors and Lens Asset Management, an activist shareholder group that has been pushing for a sale.

The sale appears to have come in the nick of time, however, to avoid such a fight. Lens, which had recently stepped up its bid to gain control of the board, had proposed five of its own director candidates. Charging that management was not looking out for the best interests of the shareholders, it had pushed for a quick sale in an effort to maximize shareholder value.

Lens, which owns 4.1% of Pioneer, had charged that Pioneer was guilty of "diluting its human and financial capital." Lens had said the company's shares should fetch as much as $42 a share, much higher than Friday’s closing price of $31.

As it turns out, Lens was a little short in its estimate of the company’s worth. UniCredito will pay $43.50 per share in cash for the money manager, nearly a 40% premium over Friday’s closing price. Shares of Pioneer Group hit a new 52-week high on the news, trading at $42.50 by midmorning. Since Lens started its campaign about three months ago, Pioneer's stock has more than doubled.

UniCredito, Italy’s second-largest bank, was looking to boost the assets of its own fund group, and continue a strategy of growth through acquisitions. A number of other bidders were said to be at the table, however, including Netherlands-based insurance giant ING Group  (ING) and U.S. fund manager T. Rowe Price Associates (TROW).

Lens sources have said that they are pleased with the price being offered, and are exploring their possible responses before offering a formal statement.

As well, Pioneer announced it has sold its struggling gold-mining operation in Ghana. The unit was cited by Lens as one of the prime examples of Pioneer’s ill-advised decision to move away from its core business. The deal with UniCredito calls for Pioneer to spin off the remaining non-asset-management-related operations.