Legg Mason To Acquire Majority Equity Interest In Clarion Partners - Quick Facts

(RTTNews) - Legg Mason Inc. (LM) announced that it has agreed to acquire a majority equity interest in Clarion Partners, a diversified real estate investment firm based in New York. One of the largest independent real estate investors, Clarion Partners manages about $40 billion across the real estate risk/return spectrum. Clarion Partners will operate as the primary independent real estate investment affiliate for Legg Mason.

As per the terms of the transaction, Legg Mason will acquire an 83% ownership stake in Clarion Partners for $585 million. In addition, Legg Mason will pay for its portion of certain co-investments on a dollar for dollar basis, estimated at $16 million as of December 31, 2015. The management team will retain 17% of the outstanding equity in Clarion Partners.

The firm's previous majority partner, Lightyear Capital, will sell its entire ownership stake in the transaction. The deal is expected to close in the second calendar quarter of 2016, and is expected to be modestly accretive to earnings in the first year after the closing, excluding one-time deal-related charges of $10-$15 million.

In a separate press release, Legg Mason said that it has acquired a minority equity position in Precidian Investments, a firm specializing in creating innovative products and solutions and solving market structure issues, particularly with regard to the ETF marketplace.

Under the terms of the transaction, Legg Mason purchased a new class of preferred equity, entitling Legg Mason to the rights of a holder of 19.9% of common equity, with the option to acquire a majority interest in the common equity. Other terms of the transactions were not disclosed.

In addition, Legg Mason said it reached a definitive agreement to combine Permal, Legg Mason's existing hedge fund platform, with EnTrust Capital.

EnTrustPermal will be led by Mr. Hymowitz, who will become the Chairman and Chief Executive Officer of EnTrustPermal.

The combination is expected to close in mid-2016. The transaction is expected to be modestly accretive to Legg Mason's earnings in the first year, after giving effect to estimated cost savings achieved that year and excluding restructuring and transition charges. Legg Mason expects EnTrustPermal to achieve cost savings of approximately $35-$40 million per year.

In connection with the combination of the businesses, Legg Mason expects to incur restructuring and transition costs of approximately $100 million, beginning in the Company's 4th Fiscal Quarter of 2016 and continuing throughout Fiscal Year 2017.