Legg Mason Acquires UK's Martin Currie, Financials Undisclosed - Analyst Blog

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On Thursday, Baltimore-based Legg Mason, Inc. ( LM ) announced the acquisition of UK-based international equity specialist firm Martin Currie. Financial terms of the deal were not disclosed.

At the close of the transaction, which is expected in the fourth quarter of 2014, Martin Currie, with assets under management (AUM) worth $9.8 billion as of Jun 30, 2014, will serve as a core independent investment partner of Legg Mason. Other existing affiliates include Brandywine Global, ClearBridge Investments, The Permal Group, QS Investors, Royce & Associates and Western Asset Management.

Moreover, the acquisition is anticipated to be accretive to Legg Mason's earnings in the first year, reflecting management's continuing assurance to create shareholder value. With six Martin Currie offices in different locations, after the integration, Legg Mason's product capabilities will be expanded in active equity strategies including Global Equity, Global Emerging Markets, Asian Equity, European Equity and strategies particularly focused on Japan and China.

In accordance with Legg Mason's stratagem of creating larger investment affiliates, as part of this transaction, Legg Mason Australian Equities (LMAE) with $2.5 billion in AUM and a team of 14 persons will be part of Martin Currie. LMAE is an active Australian equities manager, which offers clients strategies including Small Cap, Property/Infrastructure, Income and Large Cap Value. However, these strategies will be under the management of LMAE investment teams, though it will be benefited from global expansion of institutional business.

Having strengthened its foothold over the years in global macro and fixed income credit, Legg Mason commands a strong presence in the U.S. Most of the company's international business is in fixed income. Therefore, the purchase of a non-US equity manager will help in diversifying Legg Mason's overall line of products and is a strategic fit for grabbing growing opportunities in equity business.

On the other hand, Martin Currie has a strong business in the UK. Therefore, with the acquisition of Martin Currie, Legg Mason will expand globally with the help of the acquired firm's asset management brand and proficiency.

Moreover, the acquisition demonstrates Legg Mason's aim of providing exceptional services to its clients with the purchase of such a flourishing asset management firm. The completion of the deal will significantly expand Legg Mason's institutional business globally.

The deal widens Martin Currie's scope and will help its expansion efforts with the commitment of providing best investment decisions to its clients. Overall, the clients of Martin Currie will have access to the industry's largest managed account platforms provided by Legg Mason, while the company will take advantage of Martin Currie's investment management potencies. Moreover, the integration is providing investment and operational independence to Martin Currie, which is beneficial for its client proposition.

Our Viewpoint

The acquisitions of such asset management companies are welcome as they play a major role in preserving investor confidence in the stock.

We also believe that Legg Mason's diverse revenue stream and sturdy capital position augur well for investors. Capital deployment efforts also bode well and boost investors' confidence. Yet, the unsettled economic environment, low interest rate and stringent regulatory issues are matters of concern.

Legg Mason is scheduled to announce its June quarter-end results on Jul 31. Our proven model predicted that Legg Mason may not post an earnings beat as it did not have the right combination of two key ingredients - positive Earnings ESP and a Zacks Rank #3 (Hold) or higher. It had a Zacks Rank #3 (Hold), but Earnings ESP is 0.00%.

Among other investment managers, Ameriprise Financial, Inc. ( AMP ) and Affiliated Managers Group Inc. ( AMG ) is scheduled to report June quarter-end results on Jul 29, while Invesco Ltd. ( IVZ ) on Jul 31.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: LM , IVZ , AMP , AMG

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