SAN MATEO, Calif. -- Franklin Resources Inc. announced Friday it has agreed to buy Templeton, Galbraith & Hansberger Ltd. for $913 million in a deal that will create the nation's largest publicly held mutual fund operator.
Bahamas-based Templeton manages 78 mutual funds worldwide, most of them overseas, and has about $21.3 billion in assets under management. Franklin manages 68 funds, mostly in U.S. fixed-income securities and has $66.5 billion under management.
'We are absolutely delighted with this agreement,' said Charles B. Johnson, president and chief executive officer of Franklin Resources. 'Templeton is exactly the firm we sought as a partner. Their mix of global equity funds blends perfectly with Franklin's strength in U.S. fixed-income products.'
Wall Street also gave a strong endorsement of the deal, as Franklin stock jumped $3.25 to $30.375 a share in mid-session trading on the New York Stock Exchange.
The deal, expected to be completed in November, still requires shareholder approval at both companies.
But the three majority TGH shareholders, who control approximately 70 percent of TGH voting stock, have agreed that the other TGH shareholders will receive a 5.4 percent premium, or up to $6 a share while the majority group should receive $5.69 a share.
'I am confident that this new partnership with Franklin will help assure our continuing place among the leaders in global investment management,' said TGH Chairman John M. Templeton. 'It will give us additional resources to expand and improve the research, investment management and client service operations that Templeton's 700 employees now carry out in 13 offices in ten nations.'
Although the merger will create a larger organization, our investment process will remain the same, as will our senior-level management team.'
The deal calls for the businesses of Templeton, Galbraith & Hansberger Ltd. to be transferred to and held by Templeton International Inc., a newly formed entity headquartered in Ft. Lauderdale, Fla. Templeton will continue to maintain its marketing and fund shareholders services operations in St. Petersburg, Fla.
In addition, the St. Petersburg facility may be used as an alternative back-up facility for the combined operation.
Chemical Bank served as the lead bank in negotiating a $360 million loan facility for Franklin. Another $150 million was raised through the sale of $150 million of 10-year 6.25 percent subordinated debentures with nondetachable warrants to investors led by San Francisco-based investment bankers Hellman and Friedman.
The majority shareholders of TGH have agreed to purchase $75 million in two-year restricted common stock of Franklin Resources. The rest of the acquisiton will be financed with internal cash.
The companies said Templeton International will be run autonomously and will continue to serve its institutional clients on an independent basis.
John Templeton will continue to play an active role in the organization, serving as chairman of the Templeton mutual funds, chairman emeritus of Templeton International, and as an advisor and consultant to senior management.
Thomas L. Hansberger, who has been president and chief executive officer of Templeton, Galbraith & Hansberger Ltd. for six years, will serve as chairman, president and chief executive officer of Templeton International.
