Legg to finance expansion via sale of shares

Asset manager seeks to raise $300 million

December 16, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

Legg Mason Inc. plans to offer 4 million shares to the public to raise more than $300 million for potential acquisitions and other corporate uses, possibly including expansion in Asian markets.

The Baltimore-based company, which is the world's 43rd-largest asset manager with about $311 billion under management, said the price of the offering is expected to be set this week. Underwriters will have an opportunity to buy 600,000 shares of Legg's stock.

Company officials said yesterday that they could not elaborate on the announcement because of the pending offering.

Shares of Legg, which are up about 37 percent this year, closed yesterday at $70.30 on the New York Stock Exchange, down $2.45, or 3 percent.

Matthew Snowling, an analyst at Friedman, Billings, Ramsey, an investment banking firm in Arlington, Va., expects the company to use the money to continue to build its growing asset management business, possibly in Asia.

"All things are on the table," Snowling said.

At the company's annual meeting in July, Raymond A. "Chip" Mason, Legg's chairman and chief executive, said overseas expansion, especially in Asia, is critical for growth. He said the company would likely open an office in Tokyo.

In January, Legg acquired the Singapore business of Rothschild Asset Management, which oversees about $1 billion.

Analysts expect mergers and acquisitions among mutual fund companies and asset managers to pick up next year as new procedures and rules from state and federal regulators are put into place to regulate the industry in the aftermath of the mutual funds scandal.

Ready cash

"I don't think anyone wants to step in aggressively until they know what the industry is going to look like," Snowling said.

"It would make sense to build a reserve and have the cash on hand if and when you make a move," he said.

Money has been pouring into Legg Mason mutual funds and private accounts, thanks in part to William H. Miller III, the firm's star mutual fund manager whose Value Trust mutual fund could beat the Standard & Poor's 500 index for a record 14th consecutive year.

Making acquisitions

Legg hasn't been afraid to make strategic acquisitions aimed at building its wealth management and mutual fund businesses.

Last month, the company agreed to buy from Deutsche Bank AG four Scudder Private Investment Counsel offices with $5.8 billion in assets under management.

Legg will pay $55 million at closing and up to $26.3 million after one year, based on the revenue of the acquired business at that time. The deal is expected to close by Dec. 31.

$1.4 billion deal

In June, Legg was rumored to be looking at buying a large share of Merrill Lynch & Co. Inc.'s asset management business, but a deal has not materialized and the companies never confirmed that they were talking.

Legg made larger back-to-back acquisitions in 2001 when it acquired Private Capital Management LP, a top-performing Florida money-management firm, for a sum that could total $1.4 billion once all payments are made.

The same year, it bought Royce & Associates Inc., a New York company known for running high-performing funds that invest in small companies, for $215 million.

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