BlackRock and BGI form funds management giant
BlackRock has agreed to purchase Barclays Global Investors (BGI) for US$13.5 billion, with the combined entity to have $2.7 trillion in assets under management (AUM).
Barclays Bank will be paid US$6.6 billion in cash by BlackRock and will make a net gain of US$8.8 billion on the sale. BlackRock plans to fund the deal from existing cash and debt facilities with a further US$2.8 billion to be raised from investors.
The purchase will include BGI’s exchange traded funds platform, iShares, which Barclay’s had previously agreed to sell to CVC Capital Partners prior to the BlackRock agreement.
However, Barclays Bank is able to accept a revised offer from CVC Capital Partners, which had made an offer to buy iShares in April. CVC agreed to pay US$4.4 billion for the iShares business and has until June 18 to better the BlackRock deal.
BGI’s iShares has over $300 billion of AUM in more than 350 funds worldwide.
The combined product offering of BlackRock and BGI, which will be renamed BlackRock Global Investors, will include equities, fixed income, cash management and alternatives. The combined group will offer clients access to global markets through various investment channels.
Once the merger is completed, which is expected to be in the fourth quarter of this year, BlackRock will have more than 9,000 employees in 24 countries. Barclays will hold a 19.9 per cent interest in BlackRock.
BGI chief executive Blake Grossman will serve as a vice chairman of the combined firm, head of scientific investing and a member of the office of the chairman, according to BlackRock chairman and chief executive Laurence Fink.
“The two firms have worked together for over seven years through BlackRock Solutions, where BGI’s US fixed income group is already a client,” Fink said.
The two firms will also seek to expand their relationships in investment banking and wealth management.
Barclays’ shareholders will have to approve the deal with BlackRock, and a meeting is expected to be held in August.
BlackRock needed to seek approval of the share issue to Barclays from its major shareholders, PNC Financial Services group and Merrill Lynch. Both of these shareholders have agreed to the share issue.
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