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  • Seller
  • Buyer
  • Type
  • Date Announced
  • Seller AUM
  • The Permal Group
  • Legg Mason, Inc.
  • Hedge Fund Of Fund
  • June 24, 2005
  • $20 Billion

Seller Details

The Permal Group is one of the five largest funds-of-hedge funds managers in the world. As of December 31, 2004, Permal Group administered $19.1 billion of assets under management, generating 2004 revenues of $348 million and net profits of $60 million. As of December 31, 2004 Permal Group represented 20% of Sequana Capital's net asset value.

Buyer Details

Legg Mason, headquartered in Baltimore , is an investment firm, structured as a holding company, which provides asset management, securities brokerage, investment banking and related financial services through its subsidiaries. In its fiscal year ended March 31, 2005, the firm's Asset Management business segment had net revenues of $1.355 billion (56% of total net revenues) and pre-tax earnings of $464.9 million (71% of pre-tax earnings). As of March 31, 2005, assets under management totaled $373 billion, with equity assets representing 38% of the total and fixed income assets representing 62%.

Transaction Summary

Under the terms of this transaction, Legg Mason will acquire an 80% interest in Permal at closing with the right to purchase the remaining 20% over the next four years. The initital payment at closing is expected to be $800 million, subject to potential downward adjustment, of which up to $200 million may, at Legg Mason's option, be in the form of Legg Mason common stock, and the remainder in cash.

The residual 20% interest in Permal, which will be in the form of Permal preferred shares, will be subject to puts and calls by Legg Mason in years 2 and 4, with payments based on a formula depending upon Permal's net revenues at the time, and subject to certain caps. The aggregate price for 100% of Permal is capped at $1.368 billion, with a $961 million floor. Legg Mason may elect to deliver up to 25% of each of the future payments in the form of Legg Mason common stock.

Permal's entire senior management team is expected to continue at the company under long-term employment agreements.

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