Legg Mason Inc. and Citigroup Inc. are delaying the closing of their $437 billion asset swap by a month, mostly because the approval process for transferring Citi's mutual funds to Legg Mason is taking longer than anticipated.
The companies had set the closing date for the end of this month, but Citigroup is seen facing a bigger-than-expected challenge in garnering shareholder approval for the fund transfer, given proxy contests on some of the closed-end funds and the ban of so-called broker votes in the voting process.
"The primary issue has been the voting of the mutual funds," Raymond "Chip" Mason, the chief executive of Legg Mason, wrote in an e-mail to his employees. "The voting to date has been very positive, with a substantial majority of those … [voting] for a transfer to Legg."
It "is likely, but not a fact, that we will make" the original deadline, the e-mail said. "For this and various other issues, we, in concurrence with Citigroup, have decided that we intend to close on Dec. 1, 2005."
Mary Athridge, a Citi spokeswoman, confirmed that the new target closing date is Dec. 1. "The deal has a lot moving parts to it," and the Nov. 1 date was not set in stone, she said. "We always said [sometime] in the fourth quarter."
After the New York Stock Exchange banned the use of broker votes on new advisory contracts last month, Citi faced increased soliciting costs and was seen mounting stronger efforts to reach out to shareholders to achieve a quorum and the required votes to approve the management contracts.
