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Rating:What's Next for Legg Mason? Not Rated 1.0 Email Routing List Email & Route  Print Print
Tuesday, September 18, 2012

What's Next for Legg Mason?

News summary by MFWire's editors

Yes, Mark Fetting up and resigned from his post as CEO. But don't think the Legg Mason [profile] drama ends there.

Amy Davis reports in the Baltimore Sun that the Baltimore money manager may very well be "headed for a breakup".

While biggest shareholder and activist investor Nelson Peltz — founding partner of hedge fund Trian Fund Management, which in turn own a 10.9 percent share of Legg — hasn't talked publicly, he may be the only one who knows what's fated for Legg Mason now, Davis writes.

Analysts speculate that Peltz may decide to sell or spin off some of Legg's nine major money-management affiliates, quite possibly the quickest way for Peltz to boost shareholders' value. Western Asset Management, Legg's largest subsidiary, is likely the asset to go off first, analysts said.

And Fetting's resignation opens the way for the board — and Peltz — to steer the company now.

"He's certainly a major decision maker," CIO Richard Cripps of EquityCompass Strategies, which worked for Legg Mason for 26 years, said. "He no doubt will have to consider the alternatives, which includes the breakup."

"He has a sense of how things should be done," said Greggory Warren, senior stock analyst with Morningstar, adding that "He's not going to sit back quietly if things aren't going the way he thinks" they should.

Peltz had taken his stake in Legg in 2009, when the stock market and shares for financial services companies were down, in the hopes that the financial sector would rebound. On the contrary, Legg has struggled to recover, with stock prices languishing, withdrawals from funds — which have shown weak performance — continuing, and an ill-fated takeover of Citigroup's asset-management business adding to the mayhem.

Fetting had made progress, but likely not fast enough for Peltz or the board, said James Hardesty, chairman of Hardesty Capital Management, also in Baltimore.

"A lot of work has to be done on the foundation before you see the results come to the surface," he said.

"I think [Peltz] lost patience right before the sun was coming up," Hardesty adds. "He wants to exercise more control. I don't know what he wants to do with that control — and he may not." 

Edited by: Irene Park


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