- Franklin Resources announced it has entered into a definitive agreement to acquire Legg Mason for $50 per share of common stock in an all-cash transaction valued at $4.5 billion
Franklin Resources announced it has entered into a definitive agreement to acquire Legg Mason for $50 per share of common stock in an all-cash transaction valued at $4.5 billion. And Franklin Resources — a global investment management organization operating as Franklin Templeton — announced it has entered into a definitive agreement to acquire Legg Mason for $50 per share of common stock in an all-cash transaction. And Franklin Resources will also assume approximately $2 billion of Legg Mason’s outstanding debt.
“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,” 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 organization that is competitively positioned to serve more clients in more places.”
The acquisition of Legg Mason and its affiliates — which collectively manage over $806 billion in assets as of January 31, 2020 — will establish Franklin Templeton as one of the world’s largest independent specialized global investment managers with a combined $1.5 trillion in assets under management (AUM) across one of the broadest ranges of high-quality investment teams in the industry.
“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. 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,” added Jenny Johnson, president and CEO of Franklin Templeton.
The combined footprint of the organization will significantly deepen Franklin Templeton’s presence in key geographies and create an expansive investment platform that is well balanced between institutional and retail client AUM. And in addition, the combined platform creates a strong separately managed account business.
“The incredibly strong fit between our two organizations 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,” remarked Joseph A. Sullivan, chairman and CEO of Legg Mason. “By preserving the autonomy of each investment organization, the combination of Legg Mason and Franklin Templeton will quickly leverage our collective strengths, while minimizing the risk of disruption. Our clients will benefit from a shared vision, strong client-focused cultures, distinct investment capabilities and a broad distribution footprint in this powerful combination.”
“Today’s announcement marks the beginning of an exciting next chapter for Legg Mason, our investment affiliates and valued clients, who will benefit from a leading global asset manager with the scale to compete and win in today’s markets. I am honored to have had the opportunity to serve as the lead independent director of this dynamic board, and I am truly appreciative of the hard work and dedication of the entire Legg Mason team,” explained Carol Anthony “John” Davidson, lead independent director of Legg Mason.
Trian Fund Management, L.P. and funds managed by it — which collectively own approximately 4 million shares or 4.5% of the outstanding stock of Legg Mason — have entered into a voting agreement in support of the transaction.
“Given the dynamics of today’s rapidly evolving and increasingly competitive asset management sector, I believe this transaction is compelling. In our view, it offers an attractive valuation for Legg Mason’s shareholders. 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 and to join Franklin Templeton, an organization that I have deep respect for and confidence in,” commented Nelson Peltz, CEO and Founding Partner of Trian Fund Management, L.P. and a Legg Mason director.
Franklin Templeton spent significant time with the affiliates and there has been strong alignment among all parties in this transaction.
“Western Asset is excited to be joining the Franklin Templeton family, a firm with a long and storied history of proven financial performance and a leadership team and board with decades of asset management experience who value our investment independence and organizational autonomy. Like us, Franklin Templeton understands the importance of culture, teams and core values to achieving outstanding investment results for clients,” noted James W. Hirschmann, CEO of Western Asset, a Legg Mason affiliate.
As part of the acquisition, Franklin Templeton will preserve the autonomy of Legg Mason’s affiliates, ensuring that their investment philosophies, processes, and brands remain unchanged. As with any acquisition, the pending integration of Legg Mason’s parent company into Franklin Templeton’s, including the global distribution operations at the parent company level, will take time and only commence after careful and deliberate consideration.
“As part of Franklin Templeton, we are confident that we will retain the strong culture that has defined our success as a recognized market leader in active equities. Their commitment to investment autonomy, augmented by the scale and reach that the combined organization will provide, will allow us to deliver for our existing clients and expand our ability to deliver our investment capabilities in new channels and regions. We are very pleased to join the team at Franklin Templeton and excited about what we can do together,” acknowledged Terrence Murphy, CEO of ClearBridge Investments, a Legg Mason affiliate.
Upon the closing of the transaction, Jenny Johnson will continue to serve as president and CEO and Greg Johnson will continue to serve as executive chairman of the Board of Franklin Resources. There will be no changes to the senior management teams of Legg Mason’s investment affiliates. And the global headquarters will remain in San Mateo, CA and the combined firm will operate as Franklin Templeton.
The all-cash consideration of $4.5 billion will be funded from Franklin’s existing balance sheet cash. And Franklin Templeton will also assume approximately $2 billion in Legg Mason’s outstanding debt. Upon closing of the transaction, Franklin Templeton expects to maintain a robust balance sheet and considerable financial flexibility with pro forma gross debt of approximately $2.7 billion with remaining cash and investments of approximately $5.3 billion. The transaction is designed to preserve the company’s financial strength and stability with modest leverage, significant liquidity, and strong cash flow to provide ongoing flexibility to invest in further growth and innovation.
Broadhaven Capital Partners, LLC and Morgan Stanley & Co LLC served as financial advisors to Franklin Resources. Ardea Partners LP also provided advice. Willkie Farr & Gallagher LLP acted as external legal counsel. PJT Partners served as the lead financial advisor to Legg Mason. And J.P. Morgan Securities LLC also served as a financial advisor to Legg Mason.
Weil, Gotshal & Manges LLP served as lead counsel to Legg Mason and Skadden, Arps, Slate, Meagher & Flom LLP served as special counsel to Legg Mason. Dechert LLP served as legal counsel to EnTrust Global.
