The acquisition would create one of the largest asset managers in the world with $1.5 trillion under management.
Franklin Resources announced a deal to buy rival asset manager Legg Mason, a tie up that could help each navigate a worldwide shift in investor preference away from active money management.
A Press Release issued on Tuesday said that they will combine in an effort to complete, as low-cost index funds upend their industry.
FR said that it agreed to acquire Legg Mason for $50 per share, or $4.5 billion, in an all cash deal. It would assume about $2 billion of debt as part of the purchase.
The company expects its purchase of Legg Mason to add to per share earnings as soon as fiscal 2021.
“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.
Legg Mason is Baltimore based, manages $803.5 billion, operates nine investment managers. It does business under separate brands. The current transaction is devised to preserve the autonomy of Legg Mason’s affiliates, Franklin said in its release.
Meanwhile, Mateo, California-based Franklin has $698 billion in assets and manages a host of equity and bond investments under the Franklin Templeton brand. The acquisition that has been announced on Tuesday would create one of the largest asset managers in the world with $1.5 trillion under management.
Shares own by Franklin, got up by 13% at 9: 34 am in New York, while Legg Mason’s stock rose 24%.
It is pertinent to mention here that Franklin Resources Inc. and Legg Mason Inc. helped pioneer asset management in the 20th century.