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Franklin Templeton agrees to buy Lexington Partners for $1.75 billion

(Bloomberg) — Franklin Resources Inc. agreed to buy Lexington Partners for $1.75 billion in cash to expand into private equity.

The deal will also complement Franklin’s offerings in real estate, private credit and hedge fund strategies, Franklin said in a statement Monday. After the deal is closed, Franklin Templeton’s alternative assets under management will be about $200 billion. 

Mutual fund companies are making acquisitions to broaden their offerings and cushion the blow of losing customers who are favoring index funds. The deal is the second in two weeks for the industry.

Franklin Resources shares rose 4.5% in early trading in New York.

“This acquisition will position us to capitalize on the highly sought after secondary private equity market,” Jenny Johnson, chief executive officer of Franklin Templeton, said in statement. 

T. Rowe Price Group Inc. agreed to buy Oak Hill Advisors, one of the biggest players in alternative credit, last week for about $4.2 billion. The purchase was aimed at helping T. Rowe Price expand into private-debt investing.

Lexington was founded in 1994 and has raised more than $55 billion from more than 1,000 institutional investors. Lexington is now making investments from its $14 billion flagship global secondary fund, its $2.7 billion middle market secondary fund and a $3.2 billion co-investment vehicle.

Broadhaven Capital Partners, BofA Securities, and Citigroup Inc. were financial advisers to Franklin Templeton. Goldman Sachs Group Inc. served as exclusive financial adviser to Lexington Partners.

Lexington has fee-based assets under management of $34 billion. The deal is expected close in the second fiscal quarter of 2022.

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