Legg Mason $1 billion 3.2-year mandatory convertible equity units talked 6.75%-7.25%, up 17.5%-22.5%

By Rebecca Melvin

New York, May 6 - Legg Mason Inc. plans to sell $1 billion of 3.2-year mandatory convertible equity units, with a unit price of $50, after the market closes on Wednesday, according to a market source.

The offering of 20 million equity units was talked to yield 6.75% to 7.25% for the coupon with an initial conversion premium of 17.5% to 22.5%.

There is a greenshoe for 3 million units, or $150 million.

The units will initially consist of a contract to purchase Legg Mason common stock and a 1/20, or 5%, undivided beneficial ownership interest in a $1,000 senior note due June 30, 2021.

There is mandatory conversion no later than June 30, 2011.

Proceeds from the equity units will be used for general corporate purposes, which may include support of liquidity funds managed by its subsidiaries, financing acquisitions and repayment of outstanding debt.

Citi Global Markets Inc., Merrill Lynch & Co., Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are joint bookrunners, with Citi and Merrill as global coordinators and structuring agents.

Baltimore-based Legg Mason is an asset management firm with $950 billion in assets under management as of March 31.

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