The rumoured BlackRock-BGI deal is going ahead, as BlackRock, Inc. announced that it will acquire Barclays Global Investors, including its iShares exchange-traded fund business, from Barclays plc in a deal valued at about US$13.5 billion.

Under the terms of the transaction, BlackRock will acquire BGI for 37.8 million shares of BlackRock and US$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. The cash portion 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 new BlackRock Global Investors will have combined assets under management of over US$2.7 trillion. “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 Fink, BlackRock’s chairman and CEO.

Barclays previously entered into an agreement to sell its iShares business to a private equity firm under a “go shop” arrangement. Unless it now receives an offer from that firm within five business days that considers to match the terms of BlackRock’s agreement to acquire BGI, the board of Barclays will execute the agreement with BlackRock and recommend it to Barclays’ shareholders for approval. The transaction is subject to approval by Barclays shareholders, regulatory approvals, client consents and customary conditions.

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.

IE