Fund industry in consolidation: Templeton wants to acquire Legg Mason

With 4.5 billion US dollars, the offer is on the table: Fanklin Templeton is apparently in the process of forging a new giant in the fund industry. In addition, Legg Mason’s approximately two billion US dollar debt is also to be taken over. If this merger goes through, the assets under management will rise to around 1.5 trillion US dollars.
This continues the trend towards consolidation, as Janus and Henderson, Standard and Life and Aberdeen, as well as smaller companies, had previously entered into alliances. This is likely to be triggered by the enormous price and cost pressure in this market segment, but also by the stricter regulation and the permanently increasing competition with index funds that are also traded on the stock exchange (ETFs). However, it remains to be seen whether the salvation really lies in size and whether the fund houses can thus achieve economies of scale and reduce costs.
The management of Franklin Templeton sees the acquisition as a milestone and significant growth potential. The structure of the Legg Mason fund house, which acts as a boutique umbrella for nine companies, is to be retained. However, this is precisely where resistance threatens, Entrust wants to buy out as one of the boutiques, but at the same time cooperate with the new owner.
The transaction is sweetened for Legg Mason shareholders by a quite attractive valuation: USD 50 per Legg Mason share is called by Franklin – an increase of 23% over the last closing price before the takeover announcement. The whole thing is to be a cash transaction, so Franklin Resources does not intend to offer or issue any of its own shares for exchange. The Legg Mason share price rose sharply after the takeover bid was announced. This was finally a ray of hope after the difficult years, but observers fear that the best times are over.