Franklin Resources (NYSE: BEN) announced Tuesday a deal to buy rival asset manager Legg Mason (NYSE:LM), a tie-up that could help each navigate a worldwide shift in investor preference away from active money management.
Franklin said in a press release that it agreed to acquire Legg Mason for $50 per share, or $4.5 billion, in an all-cash deal and that it would assume about $2 billion of debt as part of the purchase.
The company expects its purchase of Legg Mason to add to per-share earnings as soon as fiscal 2021. Shares of Legg Mason soared $9.66, or 23.7%, to $50.38 in early Tuesday trading following the announcement while Franklin stock jumped $2.95, or 12.1%, to $27.32
Baltimore-based Legg Mason, which manages $803.5 billion, operates nine investment managers that do business under separate brands. The current transaction is devised to preserve the autonomy of Legg Mason’s affiliates, Franklin said in its release.
San Mateo, California-based Franklin, meanwhile, has $698 billion in assets and manages a host of equity and bond investments under the Franklin Templeton brand. The acquisition announced Tuesday would create one of the largest asset managers in the world with $1.5 trillion under management.
Many active asset managers like Legg Mason and Franklin Resources have struggled in recent years as low-cost, "passive" index funds and ETFs draw investors away from the classical investment model based on management fees and savvy stock picking.
