Legg Mason Diversifies Revenues with Clarion Partners Buy

Legg Mason's $585 million purchase of Clarion Partners "will diversify Legg Mason’s assets and revenue stream to benefit our shareholders," according to the company's CEO.
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Legg Mason headquarters at the Baltimore Inner Harbor. Photo credit: Benoit Syxx, Flickr

Clarion Partners referred to it as getting a “new majority financial partner,” while Legg Mason simply said that it will acquire a majority equity interest in Clarion Partners. Either way, for an estimated $585 million, Legg Mason, a global asset management firm with $671.5 billion in AUM as of Dec. 31, has bought itself a very significant entree into the CRE world. Legg Mason is the 21st-largest asset manager as ranked by worldwide assets, according to Pensions & Investments, and this transaction marks the company’s interest in diversifying through acquisitions. In addition to this deal, last week Legg Mason acquired a minority equity stake in Precidian Investments, a firm specializing in developing ETFs, Pensions & Investments reported.

Clarion’s previous majority partner, Lightyear Capital, will sell its entire ownership stake to Legg Mason as part of the transaction, which is expected to close in the second quarter. (Earlier this month, CPE reported on the rumors that Legg Mason and Clarion Partners had been working on a deal for some weeks and the subsequent announcement of the deal.)

Clarion Partners, which invests exclusively in real estate strategies across the Americas, will join Legg Mason as one of its independent investment management affiliates. A “significant number” of Clarion Partners’ management team reportedly have signed long-term contracts in conjunction with the transaction.

Headquartered in New York and with about $40 billion in AUM, Clarion Partners also has offices in Atlanta, Boston, Dallas, London, Los Angeles, São Paulo, Seattle and Washington, D.C.

“Clarion, with a focus on strong performance through market cycles, a positive growth profile and differentiated product offerings, brings an important alternative asset class to our portfolio of investment managers,” said Legg Mason Chairman and CEO Joe Sullivan.

“Clarion is a world-class investment firm that has consistently delivered attractive performance across a number of strategies for its clients,” Sullivan told CPE. “This business will diversify Legg Mason’s assets and revenue stream to benefit our shareholders.”

“In fact,” he added, “Clarion’s asset base is highly and unusually diversified in and of itself, within the context of the real estate industry.” (Clarion Partners manages investments across a broad range of real estate sectors, including office, industrial, retail, residential and hotel.)

He concluded that, “When you look at the fundamentals in commercial real estate, the supply-demand curve, increasing institutional allocations to real estate, and burgeoning retail and foreign demand, we see the potential for continued growth of their business.”

Clarion Partners was advised by Morgan Stanley & Co. LLC, King & Spalding and Davis Polk & Wardwell LLP, and the senior management team was advised by Grail Partners. RBC Capital Markets and Azrack & Co. served as financial advisors to Legg Mason.