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BlackRock nears BGI deal to build asset powerhouse

Published 06/09/2009, 11:38 AM
Updated 06/09/2009, 11:59 AM
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* U.S. asset manager set to pay $12-13 bln for BGI -sources

* Deal could come as early as Wednesday

* Enlarged manager will have near $3 trln in assets

* BlackRock shares up 7 percent, Barclays up 2 percent

By Steve Slater

LONDON, June 9 (Reuters) - U.S. money manager BlackRock is near to buying Barclays Global Investors (BGI) for between $12 billion and $13 billion to create a global asset manager twice the size of its nearest rival, people familiar with the matter said.

British bank Barclays Plc will receive cash and shares and a deal could come as early as Wednesday, although there is potential for a delay, the sources said.

BlackRock has been the frontrunner to land BGI in recent weeks and is likely to pay about half in cash and half in shares, the sources said. Barclays would retain about a 20 percent stake in the enlarged asset manager, diluting the 49 percent holding of Bank of America and 33 percent holding of PNC Financial Services.

Barclays said on Monday it had received proposals for BGI and iShares from a number of parties and was continuing talks.

Bank of New York Mellon has also been in discussions with the bank about a deal, sources have said.

San Francisco-based BGI is the world's biggest fund manager, with $1.5 trillion in assets under management, and would swell BlackRock's assets to $2.8 trillion, double the amount managed by nearest rival State Street.

The deal will scupper the proposed sale of iShares, part of BGI, to buy-out house CVC for $4.4 billion. Under the terms of that deal Barclays can hunt for better offers.

CVC will have five days to respond to BlackRock's offer for BGI, but it is likely to walk away, a person familiar with the matter said.

CVC is in line for a $175 million break fee. About $35 million of that would go to advisors and the remaining $140 million would go to its investors, another source said.

By 1528 GMT Barclays shares were up 1.8 percent at 289 pence, valuing the bank at 24 billion pounds ($38.6 billion). BlackRock shares were up 6.9 percent at $181, lifting its market value over $22 billion.

BlackRock is likely to get funding for a deal from the Qatar Investment Authority (QIA) and possibly other Middle East investors, the people familiar with the matter said. They could inject $3 billion and get a near 12 percent stake, according to media reports. ($1=.6215 Pound) (Additional reporting by Victoria Howley and Simon Meads; Editing by Jon Loades-Carter)

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