Trian Ends Six-Year Push at Legg Mason With Sale to Shanda

  • Activist exits after Legg lost 42% of its value in past year
  • Shanda sees growth opportunities in asset management business

Activist investor Trian Fund Management agreed to sell its 9.9 percent stake in Legg Mason Inc. to Shanda Group, ending a six-year push to lift the share price of the Baltimore-based money manager.

Trian is selling “substantially all” of the shares it owns to Shanda, a Singapore-based investing holding company, according to a statement Tuesday from Baltimore-based Legg Mason. The terms weren’t disclosed.

Since the New York hedge fund firm started lobbying for change in 2009, Legg Mason installed a new chief executive officer, Joseph A. Sullivan, improved performance at its mutual funds and embarked in a series of acquisitions. Nelson Peltz, a billionaire investor and founding partner of Trian, resigned from Legg Mason’s board in 2014. Shares of Legg Mason initially rallied, reaching a high of $58.92 in February of last year. They have since lost almost half of their value as stock markets became more volatile.

“We have been in a volatile market and the flow trends for active management have been difficult,” Macrae Sykes, an analyst with Gabelli & Co. said in an interview Tuesday, explaining the decline in Legg Mason shares.

Legg Mason rose 0.5 percent to $31.72 at 10:56 a.m. in New York. The shares have lost 42 percent of their value in the past year, compared with a decline of 18 percent for the 19-member Standard & Poor’s 500 index of asset managers and custody banks. The stock is still up about 44 percent since reports of Trian’s activist campaign first came out in June 2009.

Outflows

Legg Mason on Tuesday reported that it had $3.2 billion in long-term outflows in March, with redemptions in both stocks and bonds.

“We are pleased to welcome Shanda as a long-term strategic shareholder,” Sullivan said in the statement announcing Trian’s stake sale. “We look forward to benefiting from their expertise in important areas of growth for us.”

Shanda was started in 1999 as an Internet conglomerate in China and transformed into a global, private investment firm in 2014. It currently has net assets valued at $8 billion in public markets, private equity and real estate, according to its website.

Tianqiao Chen, chief executive of Shanda, said in the statement that the asset management business is “entering a new phase of growth opportunities.”

Trian’s Involvement

When Trian first got involved in 2009, Legg Mason was still reeling from the aftermath of the financial crisis. Its best known fund, Legg Mason Value Trust run by Bill Miller, lost 55 percent in 2008, and some of the bond funds run by its Western Asset Management unit stumbled as well. Those developments led to years of investor redemptions.

Better performance, especially at Western, eventually slowed the outflows. Under Sullivan, who took over in February 2013, Legg Mason has done a series of acquisitions to broaden its lineup beyond stocks and bonds.

In January the company paid $585 million for an 83 percent stake in Clarion Partners, which specializes in real estate. It also took a minority position in Precidian Investments, which is trying to win regulatory approval for technology that could speed the growth of actively managed exchange-traded funds. In 2015 Legg Mason took a majority interest in Rare Infrastructure Ltd., a Sydney-based investment manager.

Legg Mason in January reported a loss for its fiscal third quarter when it took an impairment charge against its Permal hedge fund unit.

Trian, founded in 2005 by Peltz, Peter May and Ed Garden, owns stakes in companies including General Electric Co., PepsiCo Inc. and Bank of New York Mellon Corp. The firm typically works with management to boost shareholder value.

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