Nuveen Takeover Makes Legg Mason and Federated Look Cheap

Nuveen Investments (JNC) announced Wednesday morning that it was being taken over by Madison Dearborn for $65 per share. JNC has assets under management [AUM] of about $165 billion roughly half of which is equities. The takeout valuation is 16 times trailing EBITDA and about 3.4% of AUM.

I think other asset management companies look starkly cheap in the light of this transaction.

Readers are aware of our positive views on Legg Mason (LM). It is trading at only 11 times TTM EBITDA and about 1.4% of AUM.

Janus Capital (JNS) , though frequently rumored as a potential takeover, looks fairly full at 16.6 times TTM EBITDA and about 3.2% of AUM.

Another fairly cheap asset manager is Federated (FII), which despite its 5% move yesterday, is trading at 11.3 times EBITDA and 1.8% of AUM.

LM manages just under $1 trillion in assets, consisting of about 35% in equities, 49% in fixed income and the balance in money market (lower margin) assets. Federated, with about $240 million in assets, is much lighter in the higher fee equity proportion with only about 16% of AUM in equities and about 74% of assets in fixed income.

Disclaimer: I, my family, or clients have a current position in Legg Mason and Federated Investors.

Comments

[Ralph F:]

I wonder whether part of what drove the Nuveen acquisition was the opportunity to convert all the closed-end bond funds into ETFs, and become a huge ETF player in one shot.

2007 Jun 21 03:27 PM

[kurt walter:]

LM and FII are the next to be taken out

2007 Jun 22 12:13 PM