Posted on: Saturday, June 25, 2005

Citibank to acquire brokerage

By Foster Klug
Associated Press

BALTIMORE — Citigroup Inc., the world's largest financial-services firm, took another step back from a one-stop "financial supermarket" when it announced a $3.7 billion deal yesterday to swap most of its asset-management business for the broker-dealer business of Legg Mason Inc.

Investors with Legg Mason mutual funds shouldn't see much change. There could be minor hassles for Citigroup customers, but analysts and company officials said they expected a largely painless transition.

The deal with Citigroup, the world's largest financial-services firm, also involves Legg Mason stock and a loan to the Baltimore financial-services firm.

Legg Mason, which started as a retail brokerage firm in 1970, will now focus solely on managing assets, becoming the fifth-largest U.S. asset manager, said CEO Raymond "Chip" Mason. Legg Mason's brokerage workforce of about 1,300 will move to Citigroup, giving the New York-based company more than 14,000 brokers.

"For the consumer, at the end of the day, it should be a better deal," said David Haas, an analyst with Fox-Pitt, Kelton. "There will be more of a consumer choice for top performing managers."

Legg Mason will distribute its asset management products through Smith Barney's broker force, Citigroup Private Bank, Citibank's 2,000 branches, CitiStreet, and Citigroup's Primerica operation.

The deal will transform Legg Mason from a regional brokerage into a money management powerhouse. It allows Citigroup to further withdraw from the "financial supermarket" model of the 1990s, lowering its total number of products while focusing in areas where the company has competitive strength.