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The Pioneer Group of Boston issued a proxy statement last week saying the firm had received a second round of bids from prospective buyers and urging shareholders to support the existing board in a proxy vote May 16, to insure that a newly elected board does not jeopardize a sale.

Lens Investment Management of Portland, Maine, is waging a proxy contest to gain control of five seats on the Pioneer's board of directors. Lens holds 4.1 percent of Pioneer's stock.

If Lens' slate of nominees is elected, it could sabotage a sale, according to the proxy statement Pioneer issued to shareholders on May 9.

"... the rapid progress of negotiations between your Board and our prospective buyers may come to an abrupt halt if Lens is given control of the company," the statement said. "Pioneer is a complex entity. If the Lens group were to gain control, who knows how long the Lens candidates would take to gain the depth of understanding of Pioneer's assets necessary to negotiate sale of the Company."

A representative from Pioneer could not be reached for comment.

But, Institutional Shareholder Services of Rockville, Md., a proxy research firm owned by Thomson Financial, is recommending shareholders vote in favor of Lens, said Jason Bozek, a senior analyst with the firm. Thomson Financial is also the publisher of this newsletter. Institutional Shareholder Services believes that if elected, the Lens nominees would not interfere with the sale of the firm, he said.

Moreover, Lens has been a catalyst in the effort to sell Pioneer, he said.

"Lens prodded (Pioneer) into action," he said. "It would be best to have them right there through the close of the sale."

Other factors that Institutional Shareholder Services considered in its decision to back Lens were Pioneer's poor performance and a proposed executive retention program the firm proposed in a recent proxy statement, he said.

The program would provide excessive benefits to executives if ownership of the company were to change and they were asked to leave with cause within two years of the sale, Bozek said. Under the plan, Pioneer would pay $13.8 million in cash to six of the firm's executive officers under these circumstances. (MFMN 4/24/99) The executives would be allowed to exercise their shares of company stock when they left and their company benefits would be extended for two years.

"Whose interest is the incumbent board looking out for, shareholder's or management's?" Bozek said.

On the same day it issued its proxy statement, Pioneer received the support of its largest shareholder, Southeastern Asset Management of Memphis, Tenn., which owns approximately 18 percent of the firm's stock.

"We have confidence in the current Pioneer Board of Directors and believe that they are in the best position to maximize shareholder value," said a spokesperson for Southeastern. "A change in the Board at this time would be detrimental to the process already well underway and would likely diminish shareholder value." Andrew R. McCarroll, vice president and assistant general counsel for the company, declined to comment further.

If a sale occurs, it is likely to be soon, said Burton Greenwald, president of B.J. Greenwald & Associates, a mutual fund consultant in Philadelphia. Current market volatility and a Federal Reserve Board meeting on May 15 that may yield higher interest rates would cut into the company's earnings, making it less attractive to a buyer, he said. And, when a company reaches the second round of bidding, a sale usually follows soon after, he said.

A foreign bank or insurance company seeking to acquire a larger fund company that has a large intermediary channel already in place are the most likely buyers, Greenwald said.

Domestic buyers are most likely to be insurance companies or a smaller fund company that wants to acquire Pioneer's distribution and portfolio management, he said.