Legg Mason Inc. strongly denied yesterday a published report that it is considering taking itself private and spinning off some of its many subsidiaries.
The question about going private comes as the Baltimore money manager's stock price has been weighed down by poor performance of its flagship mutual funds and soured investments in mortgage-backed debt by some of its money-market funds.
Citing people familiar with the situation, the New York Post reported yesterday that Legg has been weighing a move involving one or more private equity investors, including Kohlberg Kravis Roberts Co., to buy the company and spin off its independently run fund units, such as equity manager ClearBridge Advisors and Permal, which invests in hedge funds on behalf of clients.
"While we don't normally comment on market rumors, in this uncertain time, we want to be clear that the NY Post story is not true and Legg Mason's strategy has not changed," Legg spokeswoman Mary Athridge said in a statement yesterday. Athridge had told the Post that the newspaper's report was "categorically untrue."
In January, Legg sold $1.25 billion in senior notes to KKR to shore up its balance sheet. Due in 2015, the notes are convertible for $107 a share in cash or stock, or a combination of both.
Assuming that debt is converted into stock, KKR could have about a 9 percent stake in Legg Mason, making it one of the company's top shareholders. The firm has about 139.8 million outstanding shares. As part of its investment, KKR gained a board seat.
KKR spokesman Mark Semer declined to comment on the Post's report.
Legg has seen its stock price fall nearly 48 percent since the beginning of the year. The shares fell $2.89, or 7.14 percent, to close at $37.56 yesterday. That gives the company a current stock market value of about $5.2 billion.
Last week, Legg said it was providing $630 million more to shore up three of its money market funds against potential investor losses. As a result, the company said, it expects to take a $318 million noncash charge against earnings in the current quarter.
Since last year, the company has made capital contributions and acquired lines of credit totaling $2.7 billion for five money market funds that have been hurt by debt tied to soured mortgages.
