Franklin Resources (trading as Franklin Templeton) will acquire Legg Mason for $50.00 per share of common stock – a US$4.5 billion deal that will give Franklin a combined US$1.5 trillion in AUM.
“This is a landmark acquisition for our organisation that unlocks substantial value and growth opportunities driven by greater scale, diversity and balance across investment strategies, distribution channels and geographies,” said Greg Johnson, executive chairman of the board of Franklin Resources, Inc.
“Our complementary strengths will enhance our strategic positioning and long-term growth potential, while also delivering on our goal of creating a more balanced and diversified organisation that is competitively positioned to serve more clients in more places.”
The deal is expected to generate “upper twenties percentage” GAAP earnings per share by as early as fiscal 2021 and generate approximately $200 million in annual cost savings. Franklin will also assume $2 billion of Legg Mason’s outstanding debt.
“The incredibly strong fit between our two organisations gives me the utmost confidence that this transaction will create meaningful long-term benefits for our clients and provide our shareholders with a compelling valuation for their investment,” said Legg Mason chairman and CEO Joseph A. Sullivan.
“Our clients will benefit from a shared vision, strong client-focused cultures, distinct investment capabilities and a broad distribution footprint in this powerful combination.”
The transaction will give Franklin significant scale, help address strategic gaps, and “significantly deepen Franklin Templeton’s presence in key geographies”.
“This acquisition will add differentiated capabilities to our existing investment strategies with modest overlap across multiple world-class affiliates, investment teams and distribution channels, bringing notable added leadership and strength in core fixed income, active equities and alternatives,” said Jennifer Johnson, president and CEO of Franklin Templeton.
“We will also expand our multi-asset solutions, a key growth area for the firm amid increasing client demand for comprehensive, outcome-oriented investment solutions.”
But while the transaction will maintain the autonomy of Legg Mason affiliates, Franklin and EnTrust Global – an affiliate that provides alternative investment solution – agreed that it was in their joint best interest to repurchase their business.
“EnTrust is an excellent business and we recognise and appreciate their desire to once again become a private company,” said Ms Johnson.
“We have appreciated their collaboration in our discussions and look forward to our ongoing relationship.”
