Citigroup plans to sell $1 billion in Legg stock

March 07, 2006|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

Citigroup Inc. announced plans yesterday to sell more than $1 billion worth of Legg Mason Inc. stock it received as part of a business swap the two financial firms completed in December.

Under the plan, Citigroup will unload 8 million shares in a public offering, reducing its stake in Baltimore-based Legg Mason to about 10.7 million shares, or about 8 percent of the company. Citigroup, based in New York, has the option to sell another 1.2 million shares. Legg Mason will not receive any proceeds from the transaction.

Legg Mason and Citigroup announced their landmark deal last summer. Through the transaction, Legg acquired Citigroup's mutual funds and asset management businesses, doubling the assets it manages to $851 billion and becoming the nation's fifth-largest money manager. In return, Citigroup took Legg's roughly 1,500 brokers as well as stock and a $550 million loan. The deal was valued at $3.7 billion.

The swap was promoted by executives as a way for both companies to rid themselves of potential conflicts of interest posed by brokers giving advice to clients while also selling their firm's mutual funds. Analysts also have noted that while Citigroup holds a stake in Legg, it still faces potential conflicts because, theoretically, the company could benefit from selling Legg mutual funds, if those sales spur Legg's stock price.

Citigroup officials, including Chief Financial Officer Sallie Krawcheck, have said from the outset that they didn't view Legg Mason as a long-term investment for their company and that they planned to sell the shares over time.

Legg Mason stock has climbed 55 percent since the deal was announced and closed at $132.43 yesterday on the New York Stock Exchange.

laura.smitherman@baltsun.com

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