U.S. asset management giant Legg Mason, Inc. is buying a majority stake in Australian infrastructure investment pioneer RARE Infrastructure Ltd.
Under the terms of the transaction, Baltimore, Md.-based Legg Mason will acquire a 75% ownership stake in Sydney-based RARE, the firm’s management team will retain a 15% equity stake, and a previous minority owner, The Treasury Group, will retain a 10% stake. The price of the deal was not disclosed.
RARE will operate as an independent investment affiliate at Legg Mason, which is a U.S.-based global asset management firm with US$699 billion in assets under management (AUM). The transaction is expected to be accretive to earnings on a GAAP and adjusted net income basis in the first year after closing, which is expected in the fourth quarter.
RARE Infrastructure specializes in global listed infrastructure investments. It manages US$7.6 billion for institutional and retail clients in Australasia, Canada, the U.S., the U.K. and Europe. As part of the deal, its senior management team have also signed long-term contracts with the firm, and will invest a portion of the proceeds from the sale into the firm’s products.
The acquisition expands Legg Mason’s offerings in equity liquid alternative investments, and it enables RARE to accelerate its growth by using Legg Mason’s global distribution network.
“The market for infrastructure investing has grown significantly over the past few years and RARE has participated in this growth, particularly in early adopter markets like Australia and Canada. We believe that global demand for these liquid, long-dated assets will continue to grow and that we can leverage RARE’s existing geographic presence into additional important markets that Legg Mason’s global distribution platform serves in the US, Asia and Europe,” said Joseph Sullivan, chairman and CEO of Legg Mason, in a statement.
“I am very excited by the opportunity to form a partnership with Legg Mason, as their goals and culture are highly aligned with RARE’s vision. Their affiliate model allows management to run the business independently with governance and oversight from the board. This partnership provides continuity and sustainability for our clients with no change to the investment team or process,” added Richard Elmslie, founder and co-CEO of RARE.