Legg Mason plans takeover Brokerage in talks to buy Brandywine Asset Management

Securities industry

November 11, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

Raymond A. "Chip" Mason, chairman of Legg Mason Inc., said yesterday that the Baltimore-based brokerage firm is in negotiations to acquire Brandywine Asset Management Inc., a privately held investment management firm with about $7 billion in assets under management.

Mason said yesterday that the companies are "shooting for mid-next week to have this finalized." He declined to reveal specifics of the deal, including the price.

In a joint press release with Legg Mason, Brandywine's founder and chairman, W. Anthony Hitschler, confirmed that the two companies are in discussions.

The companies said terms have not been finalized and that completion is subject to a definitive agreement and satisfaction of conditions by clients and regulators.

Scott Kuensell, managing director with Wilmington, Del.-based Brandywine, declined to comment further.

Legg's stock closed at $48.25 a share, down $1.625.

"On paper it is a great fit," said Michael A. Flanagan, a brokerage analyst with Financial Service Analytics in Fort Washington, Pa. "They [Brandywine] have a fine reputation, so it should fit in with and complement Legg Mason's existing funds management business very nicely."

Brandywine Asset is an 11-year-old privately held company with 65 employees. It is not related to the Brandywine Fund, the well-known mutual fund managed by Foster S. Friess.

Brandywine Asset specializes in managing money for pension funds, and it invests in stocks that are out of favor with investors with the expectation that the shares will appreciate. The style meshes with that used by Legg Mason's highly successful Value Trust Inc. mutual fund. Its manager, William H. Miller III, has used the "value investing" technique to make it one of the best performing mutual funds in the country.

"We have always been a value investor," Mason said. "This [Brandywine] is about as pure value as you are going to get."

Earlier this year, Brandywine retained investment banker Goldman, Sachs & Co. to help it consider various options, including the sale of the company.

Legg itself has long been the subject of takeover rumors, but Mason has said repeatedly that he wants it to remain independent.

Legg is more than seven times the size of Brandywine. It manages $51.7 billion for individuals, institutions and mutual fund clients, has about 110 branch offices throughout the country and about 3,000 employees.

In 1995 and '96, Legg acquired three asset managers: Lehman Brothers Global Asset Management, Cincinnati-based Bartlett & Co., and Boston-based Batterymarch Financial Management Corp.

It is unclear whether Legg plans to move Brandywine's operations and employees to Baltimore or make significant changes to its operations.

Legg is building its asset management business so it does not have to rely as heavily as it once did on commissions generated from its brokers. Profits in the brokerage business can dry up when the stock market performs poorly.

Legg Mason has talked with about 20 firms over the years, Mason said last July at the company's annual meeting. But only two of the deals reached serious negotiations, and neither worked out.

"They have gone to the altar many times," Flanagan said. "They might finish the ceremony this time."

Pub Date: 11/11/97

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