Legg Mason Inc. has agreed to acquire QS Investors, a New York-based investment firm with $4.1 billion in assets under management and nearly $100 billion in assets under advisory.
Financial terms of the deal, announced Tuesday, were not disclosed.
The Baltimore-based money management firm said it plans to integrate its Batterymarch Financial Management and Legg Mason Global Asset Allocation divisions over time into QS Investors.
The deal, Legg CEO Joseph A. Sullivan said on a conference call with analysts, "is entirely in keeping with what I have said many times, namely that we intend to have fewer and larger affiliates to brand and to market."
With $680 billion under management at the end of January, Legg Mason is one of the largest fund firms, but has struggled to end withdrawals of cash by investors since the financial crisis.
News of the deal spurred Legg Mason's shares to trade higher than they have since 2008 amid a broader rally in financial stocks. Shares of Legg Mason rose $1.34 each in Tuesday trading to close at $46.65.
QS Investors mainly serves institutional clients, but Sullivan said he hopes to make some of its strategies available to retail investors as well.
"Optimizing and expanding our portfolio of investment products has been a top priority for our senior management team," Sullivan said in the company's announcement. "The combination of QS Investors' highly regarded investment capabilities and thought leadership with our existing investment teams creates a powerful offering in an area of the market that is expected to experience significant growth in the coming decade."
The acquisition, which is expected to add modestly to Legg's earnings in the first year, is set to close in the first quarter of fiscal year 2015. The Baltimore firm expects to incur $35 million in restructuring and transition costs.
The agreement will result in an unspecified number of layoffs, Legg Mason spokeswoman Mary Athridge said, as the two other Legg Mason units are combined with QS Investors.
The expanded QS Investors will be headed by QS Investors CEO Janet Campagna, who will retain the CEO title, and Rosemary Macedo as chief investment officer. Investment professionals from both Batterymarch and Global Asset Allocation will join the team, Legg Mason said.
Campagna said in the announcement that QS and Legg Mason share a "client first" culture. QS Investors provides asset management and advisory services to institutional clients.
QS Investors was once a unit of Deutsche Bank AG and was spun out in 2010 as a privately held firm. Campagna said on the conference call the deal would help in areas like sales.
"We needed a strong global distribution partner," she said.
Reuters contributed to this article.