Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
As previously announced, on
The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions in the Merger Agreement, Merger Sub will merge with and into Legg Mason (the "Merger"), with Legg Mason surviving the Merger as a wholly-owned subsidiary of the Company.
Under the Merger Agreement, at the effective time of the Merger, each
outstanding share of Legg Mason common stock, par value
In addition, the Merger Agreement provides that all issued and outstanding stock options to purchase shares of Legg Mason Common Stock (the "Legg Mason Options") will automatically terminate and be cancelled at the effective time of the Merger and each holder of Legg Mason Options with a per share exercise price that is less than the per share Merger Consideration will be entitled to receive a lump sum cash payment (less any applicable withholding taxes) at the effective time of the Merger in an amount equal to the product of (A) the number of shares of Legg Mason Common Stock underlying such Legg Mason Options immediately prior to the effective time of the Merger, and (B) an amount equal to the Merger Consideration minus the exercise price of such Legg Mason Options. Additionally, all issued and outstanding restricted stock units in respect of Legg Mason Common Stock (the "Legg Mason RSUs") will automatically terminate and be cancelled at the effective time of the Merger and each holder of a Legg Mason RSU will be entitled to receive a lump sum cash payment (less any applicable withholding taxes) in an amount equal to (A) the product of (i) the Merger Consideration and (ii) the number of shares of Legg Mason Common Stock subject to such Legg Mason RSU, plus (B) any accrued but unpaid dividend equivalent rights in respect of such Legg Mason RSUs (with any Legg Mason RSUs that were eligible to vest based on the achievement of performance criteria deemed to have vested at the target level of performance for purposes of determining the number of shares subject to such Legg Mason RSU).
The Merger is subject to the approval of the Merger Agreement by the stockholders of Legg Mason. The Merger is also subject to other customary closing conditions, including among other things:
• the receipt of approvals, or the expiration or termination of waiting periods under, certain regulatory laws or from certain regulatory authorities (including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, certain foreign competition authorities, and other foreign andU.S. regulatory bodies); • the absence of a material adverse effect on Legg Mason; and • the receipt of the consent from Legg Mason advisory clients and funds representing a Closing RevenueRun Rate (as defined in the Merger Agreement) of at least 75% of the Base Date RevenueRun Rate (as defined in the Merger Agreement) for all Legg Mason clients and funds.
For each of the Company and Legg Mason, the obligation to complete the Merger is also subject to the accuracy of the representations and warranties of, and compliance with covenants by, the other party, in accordance with the materiality standards set forth in the Merger Agreement.
The Merger Agreement provides that the Company and Legg Mason may mutually agree to terminate the Merger Agreement before completing the Merger. In addition, either the Company or Legg Mason may decide to terminate the Merger Agreement if:
• the Merger is not consummated byFebruary 17, 2021 (the "Outside Date"); - 2 -
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• a court or other governmental entity issues a final and nonappealable order permanently prohibiting or making illegal the transactions contemplated by the Merger Agreement; • Legg Mason stockholders fail to approve the Merger Agreement; or • the other party breaches its representations, warranties or covenants in the Merger Agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the Merger, subject to the right of the breaching party to cure the breach.
The Company may also terminate the Merger Agreement:
• prior to the stockholder approval of Legg Mason being obtained, if the board of directors of Legg Mason (i) withdraws, modifies or amends its approval or recommendation of the Merger Agreement or the Merger in any manner adverse to the Company or (ii) approves or recommends a competing takeover proposal with a third party; or • Legg Mason fails to call or hold the meeting of its stockholders in connection with the Merger or commits an intentional breach of its non-solicitation obligations under the Merger Agreement.
The Merger Agreement also prohibits Legg Mason from soliciting, or participating in discussions or negotiations or providing information with respect to, competing takeover proposals, subject to certain exceptions.
The Merger Agreement provides that, under certain circumstances involving a
termination of the Merger Agreement in relation to the receipt of an
unsolicited, competing acquisition proposal that the Legg Mason board of
directors determines is a superior proposal, Legg Mason will be obligated to pay
the Company a termination fee of
The Company and Legg Mason have agreed to representations, warranties and covenants in the Merger Agreement, including, in the case of the Company, a covenant to use best efforts to take any and all actions necessary to obtain clearance or approval of the Merger with applicable antitrust and competition regulators.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and incorporated herein by reference. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, including, among others, covenants by Legg Mason (i) with respect to the conduct of its business during the interim period between the execution of the Merger Agreement and consummation of the Merger and (ii) not to engage in certain kinds of transactions during such period.
The above description of the Merger Agreement and the copy of the Merger Agreement attached hereto have been included to provide investors with summary information regarding its terms. It is not intended to provide any factual information about the Company, Legg Mason or any of their respective subsidiaries or affiliates. The Merger Agreement contains representations and warranties made by and to the parties thereto as of specific dates. The statements embodied in those representations and warranties were made solely for purposes of that contract between the parties and are subject to qualifications and limitations agreed by the parties in connection with negotiating the terms of that contract (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts). In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from those generally applicable to investors, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, and covenants or any descriptions thereof as accurate or complete characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties,
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covenants, conditions and other terms of the Merger Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties, covenants, conditions and other terms may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures.
Voting Agreement
In connection with the execution of the Merger Agreement, the Company and
The Voting Agreement will terminate upon the earliest of (i) the mutual agreement of the Company and each Stockholder, (ii) the effective time of the Merger, (iii) the termination of the Merger Agreement in accordance with its terms, (iv) the conclusion of the Legg Mason stockholders meeting at which the vote in respect of the Merger is taken and (v) the entry without the prior written consent of the Stockholders into any amendment or modification of the Merger Agreement which results in a decrease in, or alteration or change in the form or composition of the Merger Consideration, an extension of the Outside Date, the imposition of any additional material condition on the consummation of the Merger or which is otherwise materially adverse to the Stockholders.
The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the Voting Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Forward-Looking Statements
Statements in this Form 8-K and the exhibits attached hereto and incorporated by
reference herein that are not historical facts are "forward-looking statements"
within the meaning of the
Various forward-looking statements in this Form 8-K and the exhibits attached hereto and incorporated by reference herein relate to the acquisition by the Company of Legg Mason, including regarding expected scale opportunities, operating efficiencies and results, growth, client and stockholder benefits, key assumptions, timing of closing of the transaction, revenue realization, cost and expense synergies, financial benefits or returns, accretion and integration costs.
Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Important transaction-related and other risk factors that may cause such differences include: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (ii) the transaction closing conditions may not be satisfied in a timely manner or at all, including due to the failure to obtain Legg Mason stockholder approval and regulatory and client approvals; (iii) the announcement and pendency of the merger may disrupt Franklin's and Legg Mason's business operations (including the threatened or actual loss of employees, clients or suppliers); (iv) Franklin or Legg Mason could experience financial or other setbacks if the transaction encounters unanticipated problems; (v) anticipated benefits of the
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transaction, including the realization of revenue, accretion, financial benefits or returns and expense and other synergies, may not be fully realized or may take longer to realize than expected; and (vi) Franklin may be unable to successfully integrate Legg Mason's businesses with those of Franklin or to integrate the businesses within the anticipated timeframe. . . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The exhibits listed on the Exhibit Index are incorporated herein by reference.
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Exhibit Index Exhibit No. Description 2.1 Agreement and Plan of Merger, dated as ofFebruary 17, 2020 , by and amongFranklin Resources, Inc. , Legg Mason, Inc. andAlpha Sub, Inc. * 10.1 Voting Agreement, dated as ofFebruary 17, 2020 , by and between the stockholders party thereto, andFranklin Resources, Inc. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A
copy of any omitted schedule will be furnished supplementally to the
parties may request confidential treatment pursuant to Rule 24b-2 of the
Exchange Act for any document so furnished.
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