The firm, with offices in Sydney, Melbourne, London and Chicago, specializes in global listed infrastructure investments, managing A$7.6 billion for institutional and retail clients. The acquisition expands Legg Mason's offerings in equity liquid alternative investments, adding an experienced manager in a high-growth asset class.
The transaction is expected to be accretive to earnings on a GAAP and adjusted net income basis in the first year after closing, which is expected in the 4th calendar quarter of 2015.
Under the terms of the transaction, Legg Mason will acquire a 75% ownership stake, the firm's management team will retain a 15% equity stake and The Treasury Group, a previous minority owner, will retain 10%. RARE will 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.
Established in 2006, RARE's investment approach is centered on risk adjusted returns on equity (RARE) and its investment process focuses on detailed analysis of cash flows of infrastructure assets that provide stable, predictable returns combined with the underlying macro and economic valuation drivers.
RARE Infrastructure, Ltd. was advised by UBS Investment Bank.
Joseph A. Sullivan, Chairman and CEO of Legg Mason, stated:
"RARE's investment expertise has strong relevance for many clients today, meeting important investment objectives including income, growth, diversification and capital preservation. 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 and that we can leverage RARE's existing geographic presence into additional important markets that Legg Mason's global distribution platform serves in the US, Asia and Europe. This is an important investment capability addition for our clients and we welcome the RARE team to Legg Mason."
Richard Elmslie, Founder and co-CEO of RARE Infrastructure, commented:
"I am very excited by the opportunity to form a partnership with Legg Mason, as their goals and culture are highly aligned with RARE's vision. Their affiliate model allows management to run the business independently with governance and oversight from the board. This partnership provides continuity and sustainability for our clients with no change to the investment team or process."
Nick Langley, Founder and co-CEO of RARE Infrastructure, added:
"For our staff and business, this provides a number of opportunities including for enhanced career progression, equity participation in the business, and access to a deep, well -resourced support team. Overall, this is a great strategic and cultural fit for RARE."