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Legg Mason's Shareholders Agree to Merge With Franklin (BEN)

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Recently, shareholders of Legg Mason approved the proposal of merger with Franklin Resources (BEN - Free Report) , operating as Franklin Templeton, which announced earlier this February. Notably, more than 99% of the votes were cast in support of the merger.

Franklin entered into an all-cash acquisition deal with Legg Mason, per which the former will acquire the latter for $50.00 per share of common stock. The combined entity will operate under the name of Franklin Templeton, headquartered in San Mateo. Notably, San Mateo, CA-based Franklin will also acquire Legg Mason’s outstanding debt worth $2 billion and assets under management (AUM) of $763 billion as of Apr 30, 2020. The deal on completion will be listed as one of the world’s largest independent, specialized global investment managers, with an AUM of $1.5 trillion in the investment management industry.

The combined entity, creating a strong separately-managed account business, aims to grab the market opportunities and scale the client base higher, striking a balance between institutional and retail client AUM. Moreover, the companies’ expanded scale, technological advancement and increased product offerings will help capitalize its market share.

However, the deal awaits certain regulatory approvals and conditions. Further, the transaction is anticipated to close in the third calendar quarter of 2020.

"We are pleased to announce that our shareholders overwhelmingly support this transaction," said Joseph A. Sullivan, chairman and chief executive officer of Legg Mason. "As we continue our planning to integrate our two great companies, I'm excited for the possibilities of a new organization that continues to prioritize our clients, the ongoing independence of our investment organizations and a broad distribution footprint," Sullivan further added.

Bottom Line

In the current scenario, firms are moving toward consolidation to dodge the heightened costs of regulatory compliance and increased investments in technology, in a bid to be competitive. Further, the coronavirus pandemic and its impact on business have escalated the concerns for survival. Moreover, the current rise in passive, low-cost index funds has taken a toll on asset managers, eroding overall profitability.

Therefore, such moves have caused investors to become optimistic about banks’ growth prospects. Shares of Legg Mason have rallied 28.1%, respectively, in the last six months, as compared with the 14.2% decline recorded by the industry.


 

 

Currently, Legg Mason holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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