Legg Mason Completes Acquisition of Clarion Partners

The Baltimore-based company paid a reported $577 million to acquire a majority stake in the New York-based real estate investment firm.

New YorkLegg Mason Inc. has acquired an 82 percent equity interest in Clarion Partners for a reported $577 million.

Additionally, Legg Mason will pay for its portion of certain co-investments on a dollar for dollar basis, estimated at $16 million as of the end of 2015. Clarion Partners has an AUM of nearly $40 billion.

Joe Sullivan of Legg Mason (courtesy of Legg Mason)

Joe Sullivan, chairman & CEO of Legg Mason (courtesy of Legg Mason via Loyola University Maryland)

“We have long expressed that we think adding real estate to our portfolio of investment capabilities at Legg Mason was important,” Joe Sullivan, Legg Mason chairman & CEO, told Commercial Property Executive. “This kind of investing in real estate provides the income and stability associated with fixed income and the growth associated with equity. It’s a nice add and a strategic add to our portfolio and gives our shareholders exposure to a new asset class, but most importantly it gives our clients access to an incremental and additional investment capability.”

With the acquisition, Legg Mason now has more than $670 billion in assets under management.

“We have a very strong mission here about investing to improve lives,” Sullivan said. “We looked at the challenges the average investor faces and we think we need to provide an increasing amount of choice and alternatives around ‘How do you get to where you want to be?’ It’s going to be hard to generate the type of returns that investors need to meet the retirement or financial goals with just traditional equity exposures. What we’ve been doing over the last couple of years is trying to build alternative investment capabilities. Clarion is considered one of the best firms in the business, so when they became available, it fit in with that mission.”

Under the terms of the deal, Clarion Partners will operate as the primary independent real estate investment affiliate for Legg Mason, and its management team will retain the remaining 17 percent of equity in the company.

Steve Furnary, chairman & CEO of Clarion Partners

Steve Furnary, chairman & CEO of Clarion Partners

Steve Furnary, Clarion Partner chairman & CEO, will continue in his role. Many of Clarion’s other leaders have signed long-term contracts in conjunction with the transaction.

“Legg Mason is an ideal partner for Clarion Partners,” Furnary said in the release. “Legg Mason values partnership within and across its independent multi-manager platform. They understand and relate well to our strong fiduciary culture and the importance of maintaining an autonomous Clarion partnership brand.”

RBC Capital Markets and Azrack & Co. served as financial advisors to Legg Mason. Morgan Stanley & Co. LLC acted as financial advisor to Clarion Partners.