Jan 22 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
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
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
Legg Mason's filing stated the charges will be taken against
results for its fiscal third quarter ended Dec. 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 Feb. 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.