Legg, whose assets under management total $923 billion, was built on a series of acquisitions, including a 2005 deal with Citigroup to acquire its money management unit. It now has 14 subsidiaries, including Western Asset Management Co., its largest unit focused on fixed-income products, and fast-growing Permal Group.
Most of its subsidiaries operate as autonomous business units, with contracts that pay most money managers a percentage of revenue.
Robert Lee, an analyst at Keefe, Bruyette & Woods, said yesterday that he doesn't see a going-private transaction for Legg soon, despite its stock price.
"If you think of their structure, which is decentralized, one of the impediments you have to any kind of [leveraged buyout] or taking it private ... it's not just Legg and the board that have to make that decision," Lee said. "You have to get all the investment subsidiaries on board."
Noting that talk of a Legg buyout crops up from time to time, Lee said KKR's investment and board seat are helping fuel the most recent speculation.
Private equity firms are said to be interested in bankrupt Lehman Brothers' asset management unit, Neuberger Berman, and performance woes in the asset management business amid the financial turmoil have stirred talk about other buyouts in recent months.
Credit Suisse, in a report in June, said a merger-and-acquisition discussion could become "a positive catalyst" for Legg stock. The firm, however, noted that while it does not expect Legg to be acquired over the next six months, the company might start to consider strategic investors "which could provide distribution leverage, and also prevent the LM stock from underperforming despite a high level of [assets under management] outflows."
In an interview in May, Legg Chief Executive Officer Mark R. Fetting rejected the idea of selling any of Legg's businesses. He declined to comment yesterday.
"Certainly, in our case, we've had no discussion about selling any of our affiliates," he said then. "We appreciate the fact that they're highly desired, but they are best as part of Legg Mason."
