BlackRock buys Barclays BGI for $13.5 bn

BlackRock buys Barclays BGI for $13.5 bn

New York: US money manager BlackRock bought Barclays Global Investors, the investment arm of British bank Barclays, for $13.5 billion, BlackRock said in a statement on Thursday.

The purchase — which is still subject to approval by Barclays shareholders — would double BlackRock’s size and create a firm managing assets worth some $2.7 trillion, employing over 9,000 people in 24 countries, according to the New York-based investment group.

In the deal, including BGI’s market-leading ETF platform iShares, BlackRock would acquire BGI for $6.6 billion cash and 37.8 million shares of common and common equivalents.

The shares will represent a 4.9% voting interest and an aggregate 19.9% economic interest in the combined firm, which will be renamed BlackRock Global Investors, the statement read.

The combination of BlackRock and BGI would bring together market leaders in active and index strategies to create the preeminent asset management firm operating under the name BlackRock Global Investors, the company said.

The transaction would create an independent and fully integrated asset management firm with combined assets under management of over $2.7 trillion.

BGI, one of Barclays’ most valuable branches with some $1.5 trillion in assets under management, has attracted interest from several buyers since April, but in recent days BlackRock was reportedly the favorite to swoop in for the deal.

If finalized the transaction will provide a valuable influx of cash for Barclays, which has hoped to strengthen its capital without resorting to assistance from the British government — something the bank has avoided so far during the world economic crisis.

“We are incredibly excited about the potential to significantly expand the scale and scope of our work with investors throughout the world," said BlackRock CEO Laurence Fink. He said: “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."

Blake Grossman, the current BGI chief executive will stay on to serve as a vice chairman of the combined firm, Fink confirmed in a statement.

Barclays in April agreed to sell iShares to private equity group CVC Capital Partners for $4.4 billion to help the bank avoid having to join a government insurance scheme for risky assets.

However Barclays has the right to break the deal and sell to a third party up until late June.

The firm’s products will include equities, fixed income, cash management and alternatives, and will offer clients diversified access to global markets through separate accounts, common trust funds, mutual funds, ETFs, hedge funds, and closed-end funds, the statement read.