What Caught Our Attention in the Investment World? – Week of February 17-21, 2020

By Kuldip K. Ambastha and Anil K. Ambastha

On Tuesday, February 18, 2020, Franklin Resources, Inc. (BEN) and Legg Mason, Inc. (LM) made big headlines. Legg Mason returned 24.4% for the day, while Franklin Resources (AKA: Franklin Templeton) returned 6.9%. Why? Franklin Resources is buying Legg Mason, in an all-cash deal valued at $4.5 billion. The deal was announced on Tuesday morning. When the deal is finalized, the combined investment management firm will have $1.5 trillion in assets under management. Franklin Resources will be paying $50 per share for the common stock of Legg Mason. Furthermore, Franklin Resources will assume approximately $2 billion of the outstanding debt of Legg Mason. This deal is a continuation of investment management industry consolidation seen in the recent past due to fee pressures plus clients opting for passive investment management instruments over active ones. Franklin Resources and Legg Mason are said to complement each other well and have little pre-existing business overlap. With the two companies combining, Franklin Resources will have a larger global footprint and a well-balanced mix of institutional and retail clients.

Keywords – Franklin Resources, Inc., Franklin Resources, Franklin Templeton, Franklin, Templeton, BEN, Legg Mason, Inc., Legg Mason, Legg, Mason, LM, all-cash deal, investment management, assets under management, common stock, debt, industry consolidation, fees, passive, active, management, global footprint, institutional, retail, clients, client.

Disclosure – The principals of Ambastha Financial LLC have long equity and short option positions in BEN. The clients of Ambastha Financial LLC have long equity positions in BEN. The principals and clients of Ambastha Financial LLC do not have any positions in LM.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

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