Legg Mason shares up on deal talk after filing

Tue Jan 22, 2013 3:04pm EST

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(Reuters) - Shares of asset manager Legg Mason Inc rose as much as 4 on Tuesday after it detailed charges tied to asset write-downs and offered to exchange notes, leading an analyst to speculate some sort of "corporate action" may be in the works.

Legg Mason has been a focus of merger or sales talk as it struggles to find better cooperation among its disparate investment units. Reuters reported earlier this month that the company had been approached by some of its senior managers and private equity firms about plans to take it private, an option its board rejected at least until it finds a new chief executive.

The company's shares were up 62 cents at $28.12. Earlier, they rose to $28.52, or 3.7 percent

In a securities filing on Tuesday, Legg Mason said it would take pretax charges of $734 million in the latest quarter, in line with its previous estimate, to account for factors including writing down asset values and uncertainly surrounding its stock price and the search for a new chief executive.

Legg Mason also said it was making the filing in connection with the planned launch of an exchange offer for its privately placed 5.5 percent senior notes due in 2019. In May, the company sold $650 million worth of the notes to help buy back securities held by KKR & Co LP, the private-equity firm that was winding down its relationship with Legg Mason.

Company spokeswoman Mary Athridge described the exchange offer as routine and required under an agreement tied to the private placement in May.

But in a note to investors, Susquehanna Financial Group analyst Doug Sipkin wrote the exchange offer could presage some kind of deal. He has a "negative" rating on the stock.

"While we remain bearish, we do acknowledge the odds of some sort of corporate action are increasing," he wrote, adding an exchange could result from some type of change in control of the company.

Sipkin also wrote that "We can't deny that something is in the works. We could be overplaying this but this increased disclosure, in connection with a planned exchange, certainly leaves us guessing."

Asked about Sipkin's research note, Athridge reiterated the exchange was only tied to the original private-placement agreement. "The purpose of Tuesday's securities filing," she said, "was to get the detailed disclosure about the impairment charges out there so that it would be incorporated into the registration statement."

Legg Mason's filing stated the charges will be taken against results for its fiscal third quarter ended December 31. It said the after-tax charges would be $508 million. Separately, Legg Mason said on Tuesday it will release its fiscal third quarter results on February 1, before trading.

Last month, the company estimated the pretax charges would total $650 million to $750 million, or $460 million to $550 million after taxes.

Mark Fetting stepped down as Legg Mason CEO in October after years of outflows from many of the company's largest funds.

(Reporting By Ross Kerber; Editing by Bernard Orr)

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