Barclays will sell its Barclays Global Investors money management arm to BlackRock, the two firms announced tonight.
At a purchase price of about $13.5 billion $6.6 billion in cash and 37.8 million shares of BlackRock stock the BGI-BlackRock deal would be the largest deal ever for a dedicated money management firm. The deal also would make BlackRock with more than $2.7 trillion in assets under management by far the worlds biggest money manager. (The BNY-Mellon deal, completed in December, 2006, had a price tag of more than $17.6 billion, but involved asset servicing such as custody, and not just money management.)
Under terms of the deal, Barclays would retain a 19.9% stake in the new firm, which would be called BlackRock Global Investors.
"This is a landmark event in the history of the investment industry," BlackRock Chairman and CEO Laurence Fink said on a conference call with reporters. "It's a very strong deal for existing and future clients."
In a news release announcing the deal, BlackRock officials said they had received the commitment of a group of institutional investors to purchase 19.9 million shares at the closing of the transaction for a total of $2.8 billion. On the conference call, Mr. Fink declined to name any of those investors.
On the conference call, Robert E. Diamond, president of Barclays PLC, who will be on the board of the new company, said Barclays had held talks with BlackRock about a possible deal "six or seven" years ago but that the timing was not right.
"John (Varley, Barclays CEO) and I are very proud to be doing this deal with Larry and Rob," Mr. Diamond said, referring to Mr. Fink and Robert S. Kapito, BlackRock's president. In the new firm, Mr. Varley will also join the board. Blake Grossman, BGI's CEO, will become vice chairman of the combined firm and a member of the "office of the chairman," according to the news release.
Barclays had agreed to sell BGI's iShares exchange traded funds business to private equity shop CVC Capital Partners for slightly less than $4.5 billion. That agreement, struck in April, included a 45-day go-shop period during which Barclays could entertain competing bids.
CVC now has five business days to match BlackRock's offer for all of BGI, not just the iShares business. During the conference call, Mr. Diamond said Barclays would not consider splitting iShares from BGI.
If a competing bid for BGI does not emerge, Barclays' board of directors will recommend shareholders approve the deal, which is expected to close in the fourth quarter.