Franklin Templeton Just Acquired Legg Mason. Will This Create Value for Shareholders?

Franklin Resources (NYSE: BEN), a holding company that operates the investment management firm Franklin Templeton, just acquired competitor Legg Mason in a $4.5 billion deal that now makes the combined firm one of the world's largest in assets under management. The deal suffered from bad timing, as it was agreed to right before the COVID-19 pandemic, which put the financial viability of the transaction into question. As a result, Franklin Resources may have overpaid for the acquisition. But in the long run, the deal could still work out if the company can drive improved earnings through operational efficiencies.

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Becoming one of the largest global investment funds comes at a price. The acquisition valued Legg Mason at $4.5 billion, or $50 per share, and will be funded with cash from Franklin Resources' balance sheet. Because the deal was negotiated prior to the COVID-19 pandemic, when industry valuations were higher, the market has penalized Franklin's share price. Franklin still trades below its levels from early February, when the deal was announced. The stock has also underperformed peers such as BlackRock and State Street.

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Source Fool.com