By James Langton

(October 30 – 17:45 ET) – Franklin Resources, parent of Templeton Management Ltd., is buying Fiduciary Trust Co. International of New York in a US$825 million stock swap.

Franklin says it plans to complete the deal in the first quarter of 2001. Fiduciary Trust International manages about US$50 billion in assets. That amount includes US$14 billion in high net worth assets with the rest for institutional accounts. The combined entity would have more than US$280 billion in assets under management worldwide.

“Together, Franklin Templeton Investments and Fiduciary Trust International will focus exclusively on meeting the investment management and service needs of financial advisors, private clients and institutions worldwide” Franklin says.

The company argues that the businesses of the two organizations are “extraordinarily complementary”, saying that the two firms make a good strategic fit. The top management at Fiduciary Trust International have agreed to enter into long-term employment agreements as part of an US$85 million retention plan.

Charles Johnson, chairman and chief executive officer of Franklin, said, “We are very excited about building a future with Fiduciary Trust International. Together with Fiduciary, our priority will be to build a global platform capable of servicing investment professionals for both the retail and institutional markets. We strongly believe this combination will increase assets and enhance shareholder value.”

Goldman Sachs & Co. advised Fiduciary Trust, while Merrill Lynch advised Franklin. In something of a surprise move, Merrill is cutting its earnings estimates for Franklin in the wake of the deal. However, Merrill sees the deal benefiting Franklin. It says the deal is a good strategic fit, gives Franklin more visible exposure to the high net worth market, further diversifies Franklin’s earnings stream, and should deliver a competitive return.

Merrill is cutting its numbers based “a solid but not as fulsome as expected fourth quarter”, and the cost of the deal. It also notes that Franklin has a mixed track record on acquisitions, with execution falling behind. It says the deal may be a distraction, and warns that cross-selling opportunities may not be realized.