Could there be a powerhouse in the making?

NEW YORK — With speculation running rampant last Friday that Morgan Stanley might be moving to acquire a controlling stake in BlackRock Inc. from PNC Financial Corp., sources said a deal is more than just market speculation and could result in the formation of one of the industry's largest money managers.

A union between Morgan Stanley and BlackRock, which has 70% of its publicly traded stock held by PNC, would create a powerhouse with a combined $884 billion in assets under management, according to SEC filings from the companies.

"It's a potentially landscape-changing deal," said Eric Fitzwater, a senior analyst who covers asset management for SNL Financial, a Charlottesville, Va.-investment bank. "It would catapult Morgan Stanley to a completely different league."

Officials at Morgan Stanley, BlackRock and PNC all declined to comment.

With Morgan Stanley undergoing a great deal of change in its executive management and investment management teams over the last year, the timing might not be ideal to integrate a $452 billion asset manager such as BlackRock into the organization, added Mr. Fitzwater.

Other analysts said the structure of the combined money management entity could determine whether such a deal is actually executed.

"It's definitely doable," said David Haas, an asset management analyst with investment bank Fox-Pitt, Kelton, New York. "Forming a separate new company might be the best way to structure it, but it would be critical to maintain the BlackRock culture."

BlackRock is coming off a solid year in which its assets under management increased more than 32%, while the value of its stock jumped more than 60%. At the close of trading on Jan. 20, BlackRock shares were up 6.4% on the takeover news and were trading at a 52-week high of $127.

While PNC might not ordinarily be motivated to sell its controlling stake in BlackRock, the current stock price — plus the premium that Morgan Stanley would pay to acquire the interest — might make it difficult for PNC to ignore a bid for BlackRock, said Matthew Snowling, senior vice president and analyst with investment bank Friedman Billings Ramsey, Arlington, Va.

A deal would provide Morgan Stanley's CEO John Mack with a significant boost to the company's asset management operations, an area that he has publicly identified as a growth opportunity since taking over in June.

A deal would also put Mr. Mack together with BlackRock's chairman and CEO Laurence Fink, who is said to be a close friend of Mr. Mack's and was reportedly offered a senior management position at Morgan Stanley last year.