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Franklin Templeton closes Legg Mason purchase

Franklin Templeton's pre-pandemic acquisition of Legg Mason has been completed.

The $4.5bn deal was announced last February, and will create a combined organisation with $1.4trn in AUM.

“We’re extremely excited to announce the close of our Legg Mason acquisition, representing the largest and most significant transaction in Franklin Templeton’s history,” said Jenny Johnson, president and CEO of Franklin Templeton in a statement.

The US fund group, which had AUM of $622bn (at 30 June 2020), agreed to buy the Baltimore-based firm and its affiliate asset management companies for $50 a share in an all-cash deal. Payment is financed by Franklin Templeton’s existing balance sheet, and which also covers $2bn of Legg Mason’s debt.

Franklin Resources (owner of Franklin Templeton) reported net income of $290.4m for the second quarter of 2020, and Legg Mason’s net income was $49.4m, according to earlier press releases.

The transaction brings together core fixed income, equities and alternatives, as well as expanding the firm’s multi-asset solutions capabilities, said Johnson.

A Franklin Templeton spokeswoman told FSA that the strengths of the deal include: the acquisition of multiple companies in one transaction, each addressing a specific part of Franklin Templeton’s overall strategy; an increase and diversification of  AUM, distribution, investment objectives and earnings; and the creation of a balance between institutional and retail clients.

According to fund research firm Morningstar, the biggest impact will be on the fixed income business, which is expected to account for nearly half of managed assets in the new entity, with roughly one-third of AUM in equities.

In a statement in February, California-based Franklin Templeton said that the unification of the two businesses should result in about $200m in annual cost savings, the majority of which should be realised within a year of the deal closing.

The statement also insisted that the autonomy and identity of Legg Mason’s affiliates would remain unchanged. The firm’s affiliates include Brandywine Global, Clarion Partners, Clearbridge Investments, Martin Currie, QS Investors, Royce Investment Partners, and Western Asset.

Staff shuffle

No changes are planned for the specialist investment managers’ independent investment strategies, and nor are there planned changes to portfolio management personnel, said the Franklin Templeton spokeswoman.

However, there has been a “review across the corporate functions of both firms and have determined where there is overlap of roles, functions, and systems,” she said.

“Concurrently, we have looked across Franklin Templeton for opportunities to streamline operations for additional savings and to increase efficiencies. These efforts necessitate a reduction of our combined workforce globally, the majority of which has already been completed,” she added

In fact, late last week ahead of the announcement of the deal’s completion, several staff changes and reporting lines in the firm’s Apac distribution team were revealed.

Vivek Kudva was promoted to head of Asia-Pacific, including India, from his previous role as head of Emea and India, and he reports to the newly announced head of global advisory services, Adam Spector.

“The combination of our two distribution platforms will enhance organic growth in the region as we expand our presence in key markets such as Japan and Australia. In addition, we see tremendous growth potential in China as the country continues to further liberalise and open up its market,” said Kudva in a statement last week.

Other changes in Apac include:

Linda Liang, who takes up a new role as head of China strategy, overseeing the business of its wholly foreign-owned enterprise (WFOE) in China, as well as its joint venture firm, Franklin Templeton Sealand Fund Management.

Isabella Chan is made head of Hong Kong, with additional responsibility for the Taiwan business, while  Shannon Wang continues as general manager at Legg Mason Investments in Taiwan, but reports to Chan.

Avinash Satwalekar takes up an expanded role as country head of Malaysia, with additional responsibility for the oversight of Asia marketing (ex-Japan and India). He will continue to serve as chairman of the board for Vietcombank Fund Management, Franklin Templeton’s JV in Vietnam with Vietcombank.

Dora Seow also has an expanded role as country head of Singapore and the broader Southeast Asia region (ex-Malaysia and Vietnam), with additional responsibility for Asia institutional client services

In Japan, Suguru Kuwahata, currently president of Legg Mason Asset Management (Japan), and Tatsuya Oguchi, currently president of Franklin Templeton Investments Japan, will both report to Kudva.

Meanwhile, Mark Browning, managing director for Asia-Pacific, and David Chang, regional head for Greater China, will leave the firm. Andy Sowerby, currently CEO of Australia and New Zealand and head of Asia-Pacific (ex-Japan) at Legg Mason, has decided to leave the organisation.

Part of the Mark Allen Group.