U.S. retail brokerage giant Merrill Lynch & Co. Inc. has agreed to combine its investment-management business with money manager BlackRock Inc. in exchange for a nearly 50% stake in BlackRock, the two firms announced today.

The transaction, which is expected to close in the third quarter, would transform BlackRock into one of the world’s top money managers, with an asset base of around US$1 trillion ($1.15 trillion).

Under the deal, Merrill Lynch’s stake in BlackRock will be 49.8%, and it will have a 45% voting interest in the combined company. The new company will operate under the BlackRock name and be governed by a board of directors with a majority of independent members.

To ensure continuity of management and high levels of service to clients of both companies, Laurence Fink, CEO of BlackRock, will serve as chairman and CEO of the combined company, and Ralph Schlosstein will continue to serve as president and a director.

Robert Doll, president and CIO of Merrill Lynch Investment Management, will become a vice chairman, CIO of Global Equities, and chairman of the Private Client Operating Committee.

The new BlackRock will provide a wide range of investments, including significant offerings in every major asset class, encompassing equity, fixed income, liquidity and alternatives. Capabilities will include U.S. and non-U.S. products in each asset class, including products created in investment centers in the U.S., London, Edinburgh, Tokyo and Australia.

BlackRock and Merrill complement each other in distribution platforms. Merrill’s industry-leading retail presence in the U.S. and its strong reputation in Europe and Asia match up well with BlackRock’s global institutional client base.