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October 13, 1997 01:00 AM

FRONTLINES: A GOOD DEAL: ASSET MANAGEMENT IS ADDED VALUE

Barry B. Burr
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    How much is Salomon Brothers Asset Management Inc. worth?

    Travelers Inc. in a widely publicized transaction agreed to buy all of Salomon Inc., including its money management unit, for stock valued at $9 billion.

    Neither Travelers nor Salomon broke out the value of Salomon Brothers Asset Management, which has $23.2 billion under management, including $5.6 billion from tax-exempt clients.

    Glenna Webster, principal with Berkshire Capital Corp., New York, an investment banking boutique specializing in the money management industry, estimates the Salomon money management unit could be worth $150 million to $165 million - "a very small piece of the $9 billion" sale.

    She estimates it could sell for 3 to 31/4 times revenue. Travelers data indicate the Salomon money management revenue was $51 million in 1996, she added.

    "This is very much a ballpark estimate," Ms. Webster said of her valuation, noting she doesn't have other financial data available, such as the unit's expenses.

    Mutual fund firms of the same size in terms of assets sell for higher multiples, she said, selling for perhaps 4 or more times revenue. Acquirers are willing to pay more for mutual fund product and distribution as well as the assets under management.

    "They have $25 billion under management, so it's a pretty good size firm," she added. But Salomon has only a fraction of its assets in mutual funds.

    It has $9 billion in mutual funds and commingled fund assets, said a Salomon spokeswoman, who didn't have a breakout available.

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