Baltimore-based money manager Legg Mason, Inc. (LM) announced on Monday that it will buy back its $300 million common stock in an accelerated share repurchase transaction. As a result, the transaction is expected to be completed earlier before the previously scheduled time.
The recent announcement is a part of Legg Mason’s $1 billion share repurchase authorization announced on May 10, 2010. The company will fund the stock repurchase with $1 billion in net free cash and cash income generated in excess of $100 million in the last quarter.
The company foresees additional stock purchases worth $100 million by the end of March 2011. The remaining stocks of the $1 billion authorization are expected to be repurchased in future years.
The accelerated shares repurchase program quickly returns capital to shareholders and executes the first phase of $1 billion stock repurchase plan.
Concurrent to the stock repurchase announcement, Legg Mason stated that it plans to cut 350 jobs, or about 10% of its workforce starting from Jul 1, 2010. Among 350 workers, 250 are in Baltimore and Owings Mills. Alongside, certain shared services are expected to be transitioned to its investment affiliates, while retaining the retail distribution, capital allocation and investment services at the corporate level.
After posting five consecutive quarterly losses, the company is experiencing improved business sentiments with the early signs of economic recovery in 2010. Moreover, a sound cash position against a risk-free balance sheet provides ample leverage even as Legg Mason seeks to return shareholder value and increase investors’ confidence through its restructuring initiatives and share buyback program.
Legg Mason’s closest competitor BlackRock, Inc. (BLK) has not been involved in share repurchase programs in the recent quarters.
As of Mar 31, 2010, before the announcement of the new stock repurchase authorization, Legg Mason had 161.4 million shares of common stock outstanding. The total number of shares to be repurchased will be based on the average price of Legg Mason’s stock through a contractually specified averaging period.
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