BlackRock Said to Offer Cash, Stock for Barclays Unit

BlackRock Said to Offer Cash, Stock for Barclays Unit

June 9 (Bloomberg) -- BlackRock Inc. may buy Barclays Plc’s fund business for $12 billion to $13 billion in cash and stock in what would be the largest acquisition in the asset-management industry, a person with knowledge of the negotiations said.

BlackRock would pay half the purchase price in cash and the rest in stock, leaving London-based Barclays with a 20 percent stake in the combined company, said the person, who asked not to be identified because the information is private. New York-based BlackRock, which may announce the deal as soon as tomorrow, is seeking to raise as much as $3 billion from sovereign wealth funds in Kuwait and Qatar, the person said.

The Barclays Global Investors unit, which oversees $1.5 trillion, would be BlackRock’s biggest acquisition, building on its 2006 takeover of Merrill Lynch & Co.’s asset-management business for $8.5 billion. That purchase, the largest to date in the industry, pushed BlackRock deeper into actively managed stock funds. BGI would add index-based funds where rivals such as Pacific Investment Management Co. aren’t as competitive.

“With many large financial institutions under pressure to prepare for the next wave of writedowns by raising capital, we can expect to see more activity like this, though the size and significance of this particular deal, if completed, would be difficult to top,” said Kirby Daley, a Hong Kong-based senior strategist at Newedge Group.

Banks and other financial institutions have amassed more than $1.46 trillion of writedowns and property losses since the financial crisis started with the collapse of the U.S. property market in 2007.

Stock Rises

Alistair Smith, a spokesman for Barclays in London, didn’t immediately return a phone call to his office yesterday after business hours. Bobbie Collins, a spokeswoman for BlackRock, declined to comment. Terms of the deal were reported earlier by the Financial Times.

Barclays, the U.K.’s third-largest bank, confirmed in a statement yesterday that it’s in talks with BlackRock and others about the sale of BGI or its iShares unit. There’s no certainty any transaction will be completed, the bank said.

BlackRock rose $5.62, or 3.4 percent, to $169.36 yesterday in New York Stock Exchange composite trading. The stock has advanced 26 percent this year, compared with the 0.3 percent increase in the Russell 1000 Financial Services Index. Barclays declined 1.25 pence, or 0.4 percent, to 283.75 pence in London.

A purchase of BGI, the world largest money manager, would give BlackRock, currently No. 3, about $2.81 trillion in assets and more customers outside the U.S. It would surpass State Street Corp., which managed $1.44 trillion as of Dec. 31, and Fidelity Investments, with $1.25 trillion. Both companies are based in Boston.

Barclays agreed in April to sell iShares, BGI’s exchange- traded fund business, to London-based CVC Capital Partners Ltd. for $4.4 billion. The bank has until June 18 to find a better deal for iShares, the world’s largest manager of exchange-traded funds, or all of San Francisco-based Barclays Global.

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