Barclays agrees sale of BGI to BlackRock for £8.2bn

| June 12, 2009 | 0 Comments

US investment group BlackRock is to buy Barclays fund management division, Barclays Global Investors (BGI), for £8.2 billion.

BGI is one of the biggest money managers operating in more than a dozen countries and manages more than $1 trillion for investors around the world. The unit owns the iShares division, which Barclays had agreed to sell to CVC Capital Partners in April for £3 billion.

However, under the terms of the CVC deal, Barclays had the right to seek a higher bidder within a 45 day period.

As Barclays has achieved a higher bidder, it now means it will have to pay a penalty of £120 million to CVC - unless CVC decides to match BlackRock’s terms, which it has five working days to do so.

Meanwhile, as a result of today’s deal, BlackRock will more than double its assets to approximately $2.7 trillion and provide the company with access to fast-growing exchange traded funds and retail investors.

BlackRock’s chief executive, Laurence Fink, described the deal as “a transformational transaction” in the investment management industry.

BlackRock, which has been established for over 20 years, has a solid footing in the mortgage market and has grown extensively through acquisitions, including its deal to acquire Merrill Lynch’s asset management operations for $8.6 billion in 2006.

In the meantime, Barclays will now own a stake of 19.9% in BlackRock and the two financial institutions will look to enhance their relationships in investment banking and wealth management.

The Barclays staff, who own 4.5% of BGI, will share a windfall of £365 million, with chief executive Bob Diamond receiving £16 million.

According to the BBC, the sale of BGI was made in order to raise funds and safeguard against further losses on loans in investments it had made.

Unlike its rivals, Barclays has so far turned down financial help from the Government, opting to go it alone last year by raising billions of pounds from investors in Qatar and Abu Dhabi.

Tags: , Barclays Global Investors, CVC Capital Partners, iShares

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