June 26, 2009 / 12:20 PM / in 11 years

UPDATE 1-Sale or break up of Legg Mason unlikely: FBR

June 26 (Reuters) - A sale or break up of Legg Mason Inc (LM.N) is unlikely and will not unlock shareholder value beyond current levels, said analysts at FBR Capital Markets, who questioned a recent newspaper report that said the asset manager could face a shareholder challenge.

Earlier this week, the UK’s Telegraph, citing unnamed “market players,” reported that activist U.S. investor Nelson Peltz planned to begin a campaign against the management of Legg Mason and had secretly bought 9 percent of the company. “We have serious doubts as to the accuracy of the report and do not believe a sale or breakup of the company is imminent,” FBR analysts wrote in a note to clients. Such a transaction would be exceedingly risky, as there is no guarantee that the purchased intellectual capital would stay in place, they added.

“Furthermore, it does not appear as though Peltz owned enough shares on May 29 (date of record) to influence the board vote scheduled for July 28, if that was his intention,” they added.

On Thursday, the Wall Street Journal, citing “a person familiar with Mr. Peltz’s investments,” reported that Peltz had not accumulated more shares and that his position in Legg Mason remained around 1 percent.

FBR analysts raised their price target on the stock by $4 to $18 to reflect an improving operating environment.

They, however, maintained an “underperform” rating, and cited concerns about the Baltimore asset manager’s continuing client outflows and vulnerability to a market pullback.

Shares of Legg Mason closed at $24.57 Thursday on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Anne Pallivathuckal)

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