Arbitrager targets Legg Mason

Arbitrage specialist investment company Laxey Partners has built up a 15.36% stake in the £27.7m Legg Mason Investors Enterprise (LMIE) investment trust, leading to speculation it may be preparing to campaign for a reconstruction.

Legg Mason said the board of the trust was currently in discussions with Laxey but could not disclose the nature of the negotiations. Laxey could not be reached for comment. The trust is managed by John Johnston, who brought the then Murray Enterprise Trust with him when he joined Legg Mason from Murray Johnstone in November 2000.

The portfolio, which had tripled in value during 1999 while still at Murray Johnstone, has fallen 36.4% over the 12 months to 16 September on a share price basis, to rank 30 in a field of 35. LMIE was trading at a discount of 32.1% on 26 September, the second-largest in the UK smaller companies sector, where the average discount was 21.1%. Laxey, a closely-held specialist investment firm incorporated in the Isle of Man, has a track record of buying large holdings in investment trusts trading at a discount and agitating for cash exits. Legg Mason confirmed Laxey's holding is sufficient for it to call a meeting of shareholders.

Earlier this month Laxey succeeded in forcing the £134.4m Baring Emerging Europe Trust to give in to its demands for a reconstruction that will allow it a cash exit at close to NAV.

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