Franklin Resources and Legg Mason Are Merging Amid Changes In Industry

Matty-Sways

Franklin Resources is set to acquire Legg Mason for $4.5 billion.

Both companies are major asset managers that have struggled with major shifts in customer preferences. Stakeholders at Legg Mason will receive a $50 premium for each share they hold. Additionally, the merger means that Franklin Resources will also inherit $2 billion in debt that Legg Mason is currently responsible for.

Combined, both asset managers will manage $1.5 trillion in assets. The merger has become necessary as the asset management industry has changed in recent years. There has been an increase in low cost asset management firms that rely primarily on tracking different stock indexes. As a result, clients have pivoted away from having individual asset managers and instead go to these lower cost alternatives.

Legg Mason owns nine different investment management firms. The merger is said to respect the autonomy of the different brands that comprise the portfolio. The merger buyout is to be transacted completely in cash.

Legg Mason had tried to pursue other options before agreeing to the merger. One major strategy proposed was centralizing the different services offered by Legg Mason’s portfolio of investment managers. However, that proposal was met with strong pushback despite the potential $110 million in savings each year.

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Economics, Finance and Investing

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