Baltimore-based investment manager Legg Mason will be acquired by the California firm Franklin Resources for $4.5 billion as part of an all-cash deal, both companies announced this morning.
The San Mateo, California-based Franklin Resources, more commonly known in the marketplace as Franklin Templeton Investments, will pay $50 per share to acquire Legg Mason and take on $2 billion of the company’s debt.
After acquiring Legg Mason’s portfolio, Franklin will manage approximately $1.5 trillion in assets. The deal is expected to close by the third quarter of 2020.
Joseph A. Sullivan, chairman and CEO of Legg Mason, said in a statement that the firm’s specialized investment managers, such as Brandywine Global and Western Asset, will remain autonomous. He characterized the new conglomerate is a “strong fit.”
“[T]he combination of Legg Mason and Franklin Templeton will quickly leverage our collective strengths, while minimizing the risk of disruption,” he said. “Our clients will benefit from a shared vision, strong client-focused cultures, distinct investment capabilities and a broad distribution footprint in this powerful combination.”
Jenny Johnson, president and CEO of Franklin Resources, said the Legg affiliates should be able to grow their portfolios with the new resources at their disposal.
“Legg Mason’s investment affiliates will be able to leverage Franklin Templeton’s global infrastructure and ongoing investment in technology and innovation, while clients can take comfort in the combined firm’s financial strength and aligned interests,” she said.
One of Legg’s subsidiary companies, EnTrust Global, has plans to buy back its stock shares and will become a private company once the merger closes. It’s not yet clear how many people working at Legg Mason’s Baltimore headquarters will be affected by the deal. Per The Sun, the company employs about 250 people in the city.
“As with any acquisition, the pending integration of Legg Mason’s holding company organization into Franklin Templeton’s will take time and will only commence after careful and deliberate consideration,” the company said in a statement. “Franklin Templeton has indicated that they expect to keep a presence in Baltimore, but it is too early to provide specifics on that.”
In an interview with The Sun, Sullivan said Franklin Templeton conceded some workers will lose their jobs.
“It won’t be the same presence,” he told the newspaper. “They’re not going to have two headquarters… There will be a loss of jobs here in Baltimore. It’s tough to say.”
In May 2019, the company laid off 120 people, about 10 percent of its workforce, spread between offices in Baltimore, New York and Stamford, Conn. A spokesperson told The Sun at the time the jobs were in the company’s legal, finance, human resources and product support departments.
As the paper noted in 2016, Legg Mason once employed 1,200 in the city and 900 elsewhere in the state as recently as 2005.
According to figures published on Legg’s site, the company donates $20 million through charitable grants, including to local organizations such as The Walters Art Museum, The Baltimore School for the Arts, Living Classrooms and Maryland Family Network.
On a conference call with investors, Johnson said the companies had been working on the deal over the past several months. The combined companies create “an all-weather global asset firm,” she said, allowing Franklin to be more competitive at home and abroad.
According to a presentation given to investors, Franklin will become the sixth-largest independent asset manager in the world after the deal is complete, jumping up from 12th place.
On the call, Sullivan said Legg Mason’s subsidiaries will now have access to 11 new international markets. Trying to build a presence in those countries from scratch would prove costly, he said.
He said Franklin’s “client-driven culture” is similar to how Legg Mason already operates.
“This combination is entirely consistent with how we think about the business,” he said.
This story has been updated.