Citigroup, Legg Mason in barter deal |
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Sat, 25 Jun 2005 08:05
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Citigroup Inc, one of the world's largest financial services firms, will swap its asset management business with Legg Mason Inc in exchange for the latter’s broker-dealer business in a deal worth about £2/$3.7 billion.
The deal is expected to be formalized during the fourth quarter of this year, subject to regulatory, shareholder and other approvals. The deal is expected to provide a major fillip to the No. 1 U.S. bank since it will now be in a position to challenge Merrill Lynch & Co. for brokerage spoils as well. The agreement includes $1.5 billion of Legg Mason common and convertible preferred stock, plus a $550 million five-year loan from Citigroup.
The firm has said that it expects to gain $1.6 billion after the deal is final. The company did not say how this would affect its earnings expectations. However, a survey by Thomson Financial shows that analysts expect the firm to earn $4.19 per share in 2005. The company added that this deal did not include Citigroup's asset management business in Mexico; its Latin American retirement services operations and its interest in the CitiStreet joint venture.
Baltimore-based Legg Mason said that it would gain $437 billion of assets under management as a part of the deal. The companies also inked a three-year deal that permits Citigroup to continue to offer its clients its asset management products. Legg Mason added that asset management products would be distributed through Smith Barney's broker force, Citigroup Private Bank, Citibank's 2,000 branches, CitiStreet, and Citigroup's Primerica operation.
In a separate deal, Legg Mason acquired the assets of Permal Group, one of world's largest managers of funds of hedge funds. The company will acquire an 80 percent stake in Permal Group from Sequana Capital and Permal Group management in an deal worth almost $1.39 billion. Legg Mason will have the option to purchase the remaining 20 percent as well. A survey showed that analysts predict that the firm would earn $4.28 per share for fiscal 2006, and $4.92 per share for fiscal 2007.
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