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Legg Mason sees growth potential, buys Australian firm

The Legg Mason building in Baltimore. (The Daily Record / Maximilian Franz)

The Legg Mason building in Baltimore. (The Daily Record / Maximilian Franz)

Legg Mason Inc. has agreed to acquire most of Australian firm RARE Infrastructure Ltd.

The company, based in Sydney, and with offices in Melbourne, London and Chicago, specializes in global-listed infrastructure investments and manages $7.6 billion for its clients, according to a statement by Legg Mason.

In the deal, Legg Mason will pay 280 million Australian dollars (close to $205 million under current exchange rates) to acquire a 75 percent stake. The firm’s management team will keep 15 percent and The Treasury Group, a previous minority owner, will keep 10 percent. Closing is expected in the fourth calendar quarter of 2015.

Legg Mason plans to let RARE operate as a core independent investment affiliate along with Brandywine Global, ClearBridge Investments, Martin Currie, the Permal Group, QS Investors, Royce and Associates, and Western Asset Management.

In the statement, Chairman and CEO Joseph A. Sullivan said that RARE’s international expertise would complement Legg Mason’s existing services in the U.S., Asia and Europe.

“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,” Sullivan said.

Legg Mason CEO Joseph Sullivan. (File)

Legg Mason Chairman and CEO Joseph A. Sullivan. (File)

The acquisition was announced just hours after Legg Mason’s annual shareholders meeting on Tuesday, during which the company’s leadership, perhaps foreshadowing the impending RARE announcement, discussed its strong position for growth.

Those leaders have been putting their money where their mouths are over the last year, during which Legg Mason also acquired New York-based QS Investors and, in another international move to go along with the RARE acquisition, Scotland-based Martin Currie.

The Baltimore-based money manager is ready to grow as it continues to rebound from the 2008 recession and take steps to rebuild its portfolio.

Legg Mason posted earnings of $237.1 million for the fiscal year ending in March, compared to $284.8 million for the previous year. Assets under the company’s management were $702.7 billion, marking the second straight year with growth after a precipitous, lengthy drop thanks to the recession.

The company also posted $16.5 billion in net long-term flows in the period ending in March—the first year since 2007 that the company’s long-term flows were positive.

Legg Mason is expected to report its quarterly earnings on Friday.

Digital editor Jason Whong contributed to this report.