Legg Mason is handing over its brokerage and capital markets groups in exchange for most of Citigroup's asset management business.
"After the asset swap is complete, Legg Mason will emerge as a new company," Barnard said, explaining that the company will be unburdened of the assets and liabilities that come along with a brokerage business, gaining long-term debt, and the asset management business likely will also carry higher margins.
Although Legg Mason will have to fight to hang on to the $400 billion in assets that it will acquire from Citigroup, the company will have access to Citigroup's distribution network to make up any lost ground and post some healthy profit, Barnard said. She predicted 11% long-term growth.
The acquisition is somewhat offset by another deal, where Baltimore-based Legg Mason acquired a controlling interest in fund-of-funds hedge fund manager Permal Group. This acquisition was pricier for the $20 billion in assets under management, but the potential synergy of the Citigroup deal strongly outweighs it, and hedge fund management adds another important component to Legg Mason's arsenal.