Franklin Resources — the asset management firm better known as Franklin Templeton — has agreed to purchase Legg Mason in an all-cash deal valued at $4.5 billion.
The combination of the two companies would make Franklin Templeton, which currently manages $688 billion, one of the largest asset managers in the world, with $1.5 trillion. As of the end of 2018, only eleven asset management firms had total assets surpassing that amount, according to Willis Towers Watson.
“This is a landmark acquisition for our organization that unlocks substantial value and growth opportunities driven by greater scale, diversity, and balance across investment strategies, distribution channels, and geographies,” Greg Johnson, executive chairman of the Franklin Resources board, said in a statement.
Under the terms of the deal, announced Tuesday morning, Franklin Templeton will pay $50 per share of Legg Mason common stock, as well as assuming approximately $2 billion of Legg Mason’s outstanding debt.
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In the announcement, Franklin Templeton said that the merger would “significantly deepen Franklin Templeton’s presence in key geographies and create an expansive investment platform that is well balanced between institutional and retail client” assets, as well as create a “strong” separately managed account business.
“This transaction gives us significant scale, addresses strategies gaps, and brings greater balance to our business, while positioning us for accelerated growth in the future,” Jenny Johnson, president and CEO of Franklin Templeton, said in a statement. She said that the deal would bring “notable added leadership and strength” in the core fixed income, active equities, and alternatives businesses, while also expanding multi-asset capabilities, which she called a “key growth area for the firm amid increasing client demand for comprehensive, outcome-oriented investment solutions.”
According to the announcement, Trian Fund Management and its funds, which collectively own 4.5 percent of Legg Mason’s outstanding shares, have agreed to vote in favor of the acquisition.
“Given the dynamics of today’s rapidly evolving and increasingly competitive asset management sector, I believe this transaction is compelling,” Trian Fund Management CEO Nelson Peltz said in a statement. “I believe it will also enable Legg Mason’s investment affiliates to remain at the forefront of an industry where scale is increasingly vital to success.”
Legg Mason’s affiliates include Brandywine Global, Clarion Partners, ClearBridge Investments, Martin Curie, QS Investors, Royce Investment Partners, and Western Asset. The Baltimore-based firm managed $806 billion as of January 31.