Bloomberg reported early yesterday morning that two Legg board members (Scott Nuttall and Nelson Peltz) are upset over CEO Mark Fetting's disclosure on May 3 that Legg subsidiary Western Asset Management Company is keeping an extra $74 million of its revenue this year, thanks to a dip in redemptions and a rise in performance.

In its article published at 12:01 a.m. yesterday, Bloomberg reported that a board meeting was set for yesterday in New York. No news reports have surfaced so far about the outcome of the meeting.

Peltz's Trian Fund Management is Legg's biggest shareholder at 7.4 percent. Nuttall hails from KKR, which bought $1.25 billion in notes from Legg in January 2008 so the asset manager could support its money market mutual funds.

"Nelson Peltz and KKR & Co.'s Scott Nuttall, two directors whose firms own stakes in the Baltimore-based asset manager, have said they’re dissatisfied Fetting didn't disclose until this month that expenses tied to bond division Western Asset Management will rise by $74 million this year," Bloomberg reported.

The rise in Wamco costs means Fetting will miss his target of boosting operating margins to 30 percent by March 2012, according to the wire service. (Legg's operating margin stood at 23 percent on March 31, 2011.) Yet not everyone sees the Wamco move as a bad thing.

"It came as a surprise to most of us," Sandler O'Neill & Partners analyst Michael Kim reportedly told Bloomberg. "While it's going to be a headwind for margin expansion, because they are making this commitment to Western, it will allow them to retain their employees and improve growth prospects."

Bloomberg's piece cites several other analysts and industry insiders, including: industry consultant Burt Greenwald' Jeff Hopson, a Stifel Nicolaus analyst; and Mike Morris, a senior analyst at Invesco (Legg's third-biggest shareholder). 

Edited by: Neil Anderson, Managing Editor


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