Citigroup and Legg Mason Trade Businesses
Citigroup and Legg Mason are working out a deal in which Legg Mason will acquire Citigroup’s Asset Management business, while Citigroup acquires Legg Mason’s Broker-Dealer business.
On top of that, Citigroup will also acquire about $1.5 billion of Legg Mason’s common and convertible preferred shares, and nearly $550 million in a five-year loan facility provided by Citigroup Corporate and Investment Banking.
The deal is valued at approximately $3.7 billion. Citigroup will have about a $1.6 billion gain after taxes, but both of these numbers are subject to adjustment.
Citigroup’s asset management business in Mexico, its retirement services business in Latin America and its interest in the CitiStreet joint venture are not included in the deal.
“We have been assessing our options for the Asset Management business and have found, in Legg Mason, a partner with an excellent product set that both complements and enhances our existing product offering to our customers,” said Citigroup CEO Charles Prince. “In addition, we are adding 1,354 experienced financial advisors in 127 branch offices to our Wealth Management business.”
Citigroup announced in a press release that it and Legg Mason have entered into a three-year global agreement under which Citigroup will continue to offer its clients Asset Management’s products and in addition, inherit Legg Mason Wood Walker’s position as the primary domestic provider of Legg Mason’s equity fund family, including the top performing equity funds of Legg Mason Capital Management Inc. managed by Bill Miller.
These will be offered through Citigroup’s Global Wealth Management businesses, Smith Barney and the Citigroup Private Bank, as well as Primerica and Citibank.
“We are pleased to welcome the high quality team of financial professionals at Legg Mason to Citigroup. Deepening our relationships with clients is a top priority, and through this transaction, we are even better positioned to meet their investment needs,” said Prince. “We are continuing to focus our resources on strengthening competitive advantages and building our leading businesses.”
“After careful review, we determined that our emphasis should continue to be on expanding access to best-in-class investment products, rather than on manufacturing proprietary asset management products,” said Citigroup President and COO Robert B. Willumstad. “As part of Legg Mason, an industry leader solely focused on asset management, our Asset Management business will have increased opportunities to grow. We look forward to working with the Legg Mason team on behalf of our clients.”
Subject to regulatory approvals and customary closing conditions, the transaction is expected to reach completion during the fourth quarter of this year. Citigroup is still seeking approval from Asset Management’s mutual fund boards and shareholders.