BlackRock in $13.5 billion Barclays deal

BlackRock Inc. has announced that it will purchase Barclays Global Investors (BGI) in a US$13.5 billion deal to become the world’s largest money manager.

BlackRock will pay $6.6 billion in cash and the remainder in stock for Barclays Global Investors, including BGI’s exchange-traded fund iShares. Barclays will retain a 19.9% stake in the combined company, which will be renamed BlackRock Global Investors.

The deal will amount to the largest purchase of a fund manager in history, creating an organization with $2.7 trillion in assets — more than the U.S. Federal Reserve — and 9,000 employees.

According to BlackRock chairman and CEO Laurence Fink, the new company will have a market value of more than $34 billion.

“We are incredibly excited about the potential to significantly expand the scale and scope of our work with investors throughout the world,” said Fink, in a statement. “The combination of active and passive investment products will be unsurpassed and will enhance our ability to offer comprehensive solutions and tailored portfolios to institutional and retail clients.”

Financing for the deal will include $2.8 billion from equities sales to institutional investors and another $2 billion in loans from Barclays and other banks.

U.K.-based Barclays agreed in April to sell BGI’s iShares exchange-traded fund unit to CVC Capital Partners for US$4.4 billion. The bank had until June 18 to find a better deal for iShares or all of BGI, which was recently valued at $10 billion.

CVC Capital Partners has been given five days to table a better offer.

(06/11/09)