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| BlackRock to acquire Barclays Global Investors for $13.5 bn |
| Press Trust of India / New York Jun 12, 2009, 15:32 IST |
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The investment management firm BlackRock today said it will buy British banking giant Barclays' fund management arm for $13.5 billion, creating a combined entity with assets worth nearly $3 trillion.
BlackRock Inc has executed a purchase agreement to acquire Barclays Global Investors, including its market leading ETF platform, iShares, from Barclays Plc, the company said in a statement.
The transaction would create an independent and fully integrated asset management firm named 'BlackRock Global Investors' with combined assets under management of over $2.7 trillion, bringing together market leaders in active and index strategies.
"The consideration of the deal would be about $13.5 billion of which $6.6 billion would be received in cash and approximately $6.9 billion in shares based on the closing price of BlackRock's common stock on 11 June 2009," Barclays Plc said in a statement.
As part of the consideration offered, Barclays Plc would receive 37.8 million new BlackRock shares giving it an economic interest of about 19.9 per cent of the enlarged BlackRock Group, which would be renamed BlackRock Global Investors.
The remainder of the consideration of $6.6 billion would be paid by BlackRock in cash, it added. Barclays said that BlackRock would fund the cash portion of the consideration partly from existing cash and debt facilities. A further $2.8 billion would be sought from equity investors.
However, the proposed transaction with Barclays is not conditional on BlackRock's equity capital raising.
Besides, Barclays would provide BlackRock with a 364-day, revolving credit facility of up to $2 billion on market terms, the company said in a statement.
"We believe that the proposed transaction is a very good one for our shareholders. We would realise immediate and substantial value for BGI and create material economic exposure to a highly competitive global asset manager through two channels: a substantial equity participation in BlackRock and the ongoing commercial relationship between Barclays and the new business.
"The combination of BGI and BlackRock represents a unique strategic opportunity to bring together the complementary capabilities and geographical footprints of two leading asset managers," Barclays Plc Chief Executive Officer John Varley said.
The transaction is expected to be closed in the fourth quarter. The two firms would seek to expand their relationships in investment banking and wealth management.
"This relationship offers the opportunity to form a closer relationship between our investment banking and wealth management business and BlackRock," Barclays PLC President Robert E Diamond Jr said.
In April, Barclays had agreed to sell its BGI's iShares division, to CVC Capital Partners for $4.4 billion. IShares is the industry-leading ETF platform, with over $300 billion of AUM in more than 350 funds worldwide.
Under the terms of the CVC transaction, Barclays is able to accept a superior offer and terminate the CVC Transaction only after giving CVC the opportunity to match the superior offer, the statement added.
CVC Capital now has until the end of June 18, to propose an alternative transaction and if it proposes an alternative transaction superior to the BlackRock offer, Barclays would continue with CVC, albeit on improved terms.
However, if it does not propose such an alternative transaction, Barclays would pay a break fee and expenses of $175 million to CVC and terminate the earlier deal.
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