LONDON: BlackRock has agreed to buy Barclays Global Investors (BGI) to create the world’s biggest asset manager, in a US$13.5bil deal that British bank Barclays hopes will put to rest concerns about its capital.
The cash-and-shares deal, unveiled in the United States late on Thursday, will see Barclays take a 19.9% stake and two seats on the board of the enlarged group, to be called BlackRock Global Investors.
Britain’s second biggest bank said yesterday a net gain of US$8.8bil would be used to bolster its capital strength, lifting its core Tier 1 capital adequacy ratio by 1.5 percentage points to around 8%.
“This (BGI) was always a core part of the business until recently but the reality is they need as much capital as possible for the core banking and investment banking business, and they’ve been able to get a very good price for the asset,” said Colin Morton at Rensburg Fund Management, which owns Barclays shares.
BlackRock is paying US$6.6bil in cash and the rest in stock. To help fund the cash payment, it is raising US$2.8bil from the sale of 19.9 million shares to a group of unnamed institutional investors, which people familiar with the matter had expected to include Middle East sovereign wealth funds.
San Francisco-based BGI’s US$1.5 trillion in funds will give BlackRock US$2.8 trillion in assets under management, catapulting it to a dominant industry position with twice the assets of nearest rival State Street.
The sale strengthens Barclays’ balance sheet after the bank refused aid from the British government that some of its rivals accepted as the global financial crisis engulfed the industry.
Chief executive John Varley said that it would make Barclays one of the best-capitalised banks in the world and he had “no worries” about the bank’s capital position. — Reuters
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