Nelson Peltz sells stake in Legg Mason to Singapore investment firm

The Legg Mason tower in Harbor East, shown earlier this year.
The Legg Mason tower in Harbor East, shown earlier this year. (Kim Hairston / Baltimore Sun)

Legg Mason found itself Tuesday morning with a new largest shareholder as activist investor Nelson Peltz sold off much of his firm's stake to a Singapore-based investment holding company.

Shanda Group purchased nearly 10 percent of the Baltimore-based wealth management company's common stock for $336.8 million from Peltz's Trian Fund Management.


Trian's sale of 10.5 million shares to Shanda was nearly its entire stake in the company and has the potential to open new opportunities for Legg Mason in Asia, analysts said. Trian had been expected to sell its stake since Peltz resigned from Legg Mason's board in late 2014.

"This is positive in that it removes an overhang associated with the Trian exit and could help [Legg Mason] with relationships in Asia," Christopher Harris, an analyst for Wells Fargo Securities, wrote in a research note Tuesday.


Shanda started in 1999 in China as an online gaming firm and says it is now valued at about $8 billion. It started investing in publicly traded companies and real estate in recent years.

The investment reflects a growing trend of Asian investors buying U.S. assets, said Macrae "Mac" Sykes, an analyst at Gabelli & Co.

The analysts did question the timing of Trian's exit, given the modest price the New York-based investor received for its shares. Trian sold its shares for $32 each for portfolio management reasons, according to SEC documents.

"Negatively, one wonders why Trian would want to exit its position in [Legg Mason] at such a low price," Harris wrote.

Trian started acquiring Legg Mason stock in 2009, paying about $30 a share, as Legg struggled to right itself after the near collapse of the financial system the year before.

In recent years, the firm has rebounded and started growing again and its stock price had climbed to about $55 when Peltz resigned. But Legg's shares have tumbled about 40 percent in the last year amid a rocky period for financial markets.

The stock closed at $32.19 on Tuesday, up 62 cents or nearly 2 percent for the day.

Sykes said Trian's exit was "a little disappointing" because of the firm's strong investment record and advocacy. At Legg, Trian pushed for reorganization and the resignation of former CEO Mark Fetting in 2012 as the firm worked to retain investors.

Legg had $670 billion in assets under management as of March 31, down about $2 million from the end of 2015, but up $33 million from a year ago.

Trian, which retained a 0.48 percent stake in Legg Mason, declined a request for an interview. The firm said in a statement that it believes that Shanda Group will be a strong strategic partner for Legg.

Trian, which took a $2.5 billion stake in General Electric last fall, may be looking to invest its money differently, said Sykes, whose employer owns about 5 percent of Legg shares. Trian also may believe that any further improvements in Legg's operations and management will be limited, Harris wrote.

Sykes said he expects the Shanda Group to take a less active role — albeit one still focused on profit.


"Shanda has deep pockets. They've been successful entrepreneurs, but I see them more at this moment taking a foothold here and being happy with the investment as it stands," Sykes said.

Tianqiao Chen, chairman and CEO of Shanda, called Legg Mason "a prestigious global investment manager with a long heritage, solid track record and strong management team."

"The management team and Shanda Group share a similar vision in bringing pioneering approaches to the asset management industry, which we believe is entering a new phase of growth opportunities," Chen said. "We look forward to supporting Legg Mason in its continuing success."

Legg Mason met with "a number" of potential buyers, including Shanda, after Trian hired Citigroup to sell its stake, spokeswoman Mary Athridge said. Legg expects Shanda to help advise Legg on both the Chinese market and technology, she said, declining to comment further.

"We look forward to benefiting from their expertise in important areas of growth for us," Joseph A. Sullivan, Legg Mason's chairman and CEO, said in a statement. "Together with our affiliates, we will execute on our strategy to provide global clients with increasingly valued and relevant choices for investment strategies, products and vehicles and we welcome Shanda's partnership in that endeavor."


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