Allianz announced Thursday that it will terminate the long-standing Pimco employee M Unit Plan and acquire outstanding Pimco M Units for cash. The decision affects a program that had granted options to Pimco employees from 2008 through 2020.
The company said outstanding M Units held by current and former employees together constitute a 9.4% ownership stake in Pimco. Of that total, former employees collectively hold a 4.4% stake. Under the terms described by Allianz, the firm will pay at least 1.4 billion ($1.61 billion) in cash at closing to purchase the M Units held by former employees in accordance with the M Unit Plan's rules.
Allianz also outlined how current Pimco employees will be treated. Rather than an immediate cash-out for all holders, current employees will be able to elect to keep their M Units under a newly established, separate contractual arrangement until the termination of their employment, Allianz said.
The move is positioned as a simplification of the capital structure at Pimco, the Newport Beach, California-based asset manager that Allianz acquired in 2000. The M Unit Plan had provided employees with an ownership-linked stake in the asset manager and had been used to grant options over a 12-year span from 2008 to 2020; no new grants were made under the program after 2020.
Key context and implications
- The M Unit Plan covered grants from 2008 to 2020, after which no new awards were issued under that program.
- Outstanding M Units amount to a 9.4% ownership stake in Pimco, with former employees holding 4.4%.
- Allianz will pay at least 1.4 billion in cash at closing for those units held by former employees; current employees can opt to retain units under a separate contractual arrangement until they leave the firm.
Risks and uncertainties
- Uncertainty remains around how many current employees will elect to keep their M Units under the new contractual arrangement, which affects the extent of Allianz's immediate cash outflows and change to Pimco's capital structure.
- The article specifies a minimum cash payment of 1.4 billion for former-employee-held M Units at closing; the final cash impact related to current employee-held units is not specified.
This announcement alters the ownership mechanics of Pimco by removing the legacy M Unit Plan and addressing the outstanding units held by former and current employees. Allianz framed the action as a move to simplify Pimcos capital structure while providing current employees with an option to retain their units under a new contractual framework until employment termination.