According to a press release, the combination of BlackRock and BGI brings together “market leaders in active and index strategies to create the preeminent asset management firm” operating under the name BlackRock Global Investors (“BlackRock”). The transaction would create an independent and fully integrated asset management firm with combined assets under management of over $2.7 trillion.
The announcement noted that Barclays previously entered into an agreement to sell BGI’s iShares business to another party under a “go shop” arrangement, and that, unless Barclays receives an offer from that party within five business days that considers to match the terms of BlackRock’s agreement to acquire BGI, the Board of Directors of Barclays will execute the purchase agreement with BlackRock and recommend it to Barclays’ shareholders for approval.
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 ability to offer BlackRock’s global mutual funds alongside iShares will create what the firm’s termed “an unmatched ability to tailor portfolios for retail investors”. iShares has over $300 billion of assets under management (AUM) in more than 350 funds worldwide.
At the closing of this transaction, which the firms say is expected to occur in the fourth quarter, Barclays will hold a 19.9% economic interest in BlackRock. The two firms will seek to expand their relationships in investment banking and wealth management.
At closing, BlackRock will have more than 9,000 employees in 24 countries and have a meaningful presence in all major markets around the world. The addition of the BGI San Francisco office will substantially expand the firm’s U.S. footprint, according to the firms.
Under the terms of the transaction, BlackRock would acquire BGI in exchange for 37.8 million shares of common and common equivalents in BlackRock and $6.6 billion of cash. 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.
Under the terms of the agreement, Barclays will have certain restrictions on the sale or acquisition of shares in BlackRock, but will have the right to maintain its ownership percentage if BlackRock issues additional shares in the future.
The cash portion of the purchase price will be funded through a mix of existing cash, committed debt facilities and proceeds from the issuance of equity securities to a group of institutional investors. The cash portion of the purchase price is 100% committed.
A group of banks, including Barclays, Citi and Credit Suisse, has committed to provide BlackRock with a new 364-day revolving credit facility of up to $2.0 billion. The facility would be drawn at closing to the extent necessary and repaid during the term from the proceeds of any capital raising transactions. It is BlackRock's intent to refinance any draw down under this facility with the proceeds of term debt financings.
BlackRock has received commitments from a group of institutional investors to purchase 19.9 million shares at the closing of the transaction for a total of $2.8 billion.
In addition to the conclusion of the go-shop arrangement, the transaction is subject to approval by Barclays shareholders, regulatory approvals, client consents and customary conditions.
"We are incredibly excited about the potential to significantly expand the scale and scope of our work with investors throughout the world. 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," said Laurence D. Fink, BlackRock Chairman and CEO.
"People are at the heart of successful firms, and the depth of talent in BlackRock Global Investors will be tremendous. The thought leadership and intellectual capital of the combined firm ensure we will remain at the forefront of addressing key investment issues and trends that have emerged over the past decade and are now accelerating dramatically, including globalization of capital markets, a greater focus on asset allocation, multi-asset class solutions, fiduciary management, risk management and advisory services."
"I am thrilled that Blake Grossman, CEO of BGI, will serve as a Vice Chairman of the combined firm, head of Scientific Investing, and a member of the Office of the Chairman. I look forward to welcoming him as my partner in leading the organization. I am equally excited about the deeper relationship with Barclays Capital and Barclays Wealth, and look forward to having John Varley and Bob Diamond join BlackRock's Board of Directors."
"We have long held BGI in the highest regard, and know that our cultures and values are strongly aligned. Both of our organizations place great emphasis on teamwork, excellence and integrity. The two firms have worked together for over seven years through BlackRock Solutions, where BGI's U.S. Fixed Income Group is already a client. This relationship will considerably ease integration as we go forward."
"This relationship offers the opportunity to form a closer relationship between our investment banking and wealth management business and BlackRock," said Robert E. Diamond, Jr., President of Barclays PLC. "The strength and breadth of BlackRock's combined platform will deepen our collaboration in serving clients worldwide."
Citi and Credit Suisse served as lead financial advisors to BlackRock. Banc of America Merrill Lynch Securities, Morgan Stanley, and Perella Weinberg Partners provided additional financial advisory support. Skadden, Arps, Slate, Meagher & Flom served as legal counsel to BlackRock.
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