Monday, February 13, 2006

Legg Mason Up for Sale in 2006?

Shares of Blackrock (BLK) popped Monday after it was revealed that the asset manager was in talks with brokerage juggernaut Merrill Lynch (MER).

The Journal valued the transaction at about $8 billion and the deal would create a company with $1 trillion in assets under management, the most of any publicly traded company.

1 trillion is a lot of dough, so we started thinking...

What other money manager could put itself up for sale inside the next 12 months as Merrill rivals begin to search for strategic partners with whom they can juice up operating scalability while boosting client assets?

The answer was a dunk shot: Legg Mason (LM).

Last July, the Journal interviewed Legg Mason founder Chip Mason; his comments regarding the future of the firm were very revealing, and re-reading them, we couldn't help but raise an eyebrow:

WSJ: You are often asked about Legg Mason's plans to fill your job once you step down. How are you handling the succession question?

Mason: I have told the board that I would give them two years' notice, but that they should be working on the succession issue. As it relates to this transaction, I have told them I will certainly stay for at least two years to guide it through.The board has been very diligent on this issue and has been working on it pretty consistently over the last 15 to 18 months and has had quite a bit of deliberation on the subject and it is my opinion that they are going to soon come forth with their viewpoints. I would anticipate that this would take place in the not distant future.

WSJ: Are you looking forward to finally kicking back after all these years?

Mason: One of the things I look forward to is not being the last car out of the parking lot. The board and others say 'Well, just cut back, do less and have other people doing other things,' and we've certainly done some of that. But with the job I have, you can't do half the job. You either do it or you don't do it.
No one can deny that the brokers are as hot as a pistol.

With interest rates kneecapping the banks and M&A in the financial services arena remaining a perennial theme, Legg Mason deserves a closer look.

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