updated 6/24/2005 9:19:47 AM ET 2005-06-24T13:19:47

Citigroup Inc. on Friday said it agreed to swap most of its asset-management business in exchange for Legg Mason Inc.'s broker-dealer business, about $1.5 billion in Legg Mason stock and a roughly $550 million, five-year loan facility. The total value of the transaction is about $3.7 billion, subject to adjustments, the companies said.

Citigroup said it expects to record a gain of about $1.6 billion after the deal closes. The agreement excludes Citigroup's asset management business in Mexico, its Latin American retirement services operations and its interest in the CitiStreet joint venture, the company said.

Citigroup also reached a three-year global agreement to continue to offer its clients asset management products and take on Legg Mason Wood Walker's role as primary domestic provider for Legg Mason's equity funds.

The deal is expected to close during the fourth quarter, subject regulatory, shareholder and other approvals.

In a separate statement, Legg Mason also said it will acquire Permal Group, one of world's largest managers of funds of hedge funds, from Sequana Capital and Permal Group management, for up to $1.39 billion, with a $961 million floor.

Legg Mason said both deals are expected to boost its earnings per share in the first year.

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