Money manager Legg Mason Inc might be better off staying intact, after all.
Some in the industry lately have suggested that selling or spinning off investment units like Legg's Western Asset Management bond division could get the Baltimore fund company's share price out of the doldrums. At $25.02 on Friday, the shares trade at less than one-quarter of the level they fetched before the financial crisis.
But one well-known analyst doubts a break up would do much to boost shareholder value. Selling or spinning off Western would require a complex and difficult process that might only boost Legg Mason's share price to about $29, William Katz, a Citigroup analyst, wrote in a report on Friday.
"Given execution risk and time leakage, the pro forma upside may not be enough to attract investors," Katz wrote. He added that his analysis was "further washing away the lingering bull thesis around major break up."
Katz was not available for an interview, a Citigroup spokeswoman said.
Legg Mason spokeswoman Mary Athridge declined to comment. The company's Chief Financial Officer Peter Nachtwey is scheduled to speak at an investment conference on November 13.
Katz's analysis comes at a dicey time for Legg Mason, which is searching for a new chief executive after its previous head Mark Fetting stepped down last month.
Complicating matters, activist investor Nelson Peltz sits on the company's board and controls just under 10 percent of the company's shares. He has not said what he plans to do after limits on his ownership end on November 15.
With about $460 billion in assets under management, Western is by far the largest piece of Legg Mason's $651 billion in total assets. Other units include its ClearBridge Advisors equity unit, with $59 billion under management, and its Brandywine Global equity and bonds shop, with $41.4 billion.
Western generates $760 million in annual revenue and so would be worth around $1.5 billion, Katz estimated in his report.