Friday, June 5, 2009

All of a sudden it seems to be a sellers’ market for financial assets.

From Alphaville:

BGI sale to Blackrock nears, $12bn price tag mooted (updated)

All of a sudden it seems to be a sellers’ market for financial assets.

Usually knowledgeable sources indicated on Friday that Barclays is now very close to completing the sale of its entire asset management arm, Barclays Global Investors, to American rival Blackrock. A statement was being prepared for release in New York after the market close, although sources warned that a formal announcement could be delayed by last minute haggling over price.

A price tag of $11-13bn has been mooted — substantially in excess of market expectations.

Barclays was first approached about selling the whole of BGI back in February. The bank subsequently decided to shore up its balance sheet by selling just iShares, its market-leading exchange trade fund business, to CVC Capital Partners. But the $4.4bn terms included a “go shop” provision (which ends on June 18) - and this left the door open to fresh approaches for the whole of BGI.

Blackrock’s interest in BGI was eventually confirmed towards the end of May.

Of the $11-13bn proceeds, some $175m will go to CVC in the form of a break-fee, but attaining such a full valuation for a business with assets under management of around $1,600bn is bound to impress - even if it was supposed to be the jewel in the Barclays crown.

The move will clear away any nagging doubts over Barclays decision to avoid seeking bailout funds from the UK government.

Oh, and Bob Diamond gets another fantastic payday.

As for Blackrock, which has been advised by Credit Suisse and Citigroup, the only question now is how it will fund the deal.

UPDATE 19.00: Still not clear whether this deal will be finalised on Friday. But one tidbit to add is that Barclays could well retain a stake in the newly merged Blackrock/BGI. So there is the potential here for Barclays Capital to get a new big customer (it doesn’t trade with BGI at present), while also sharing in the upside. If there is any, of course.

Neil Hume and Paul Murphy


Don the libertarian Democrat Jun 6 04:53
"All of a sudden it seems to be a sellers’ market for financial assets."

I believe that this is also influencing the behavior of asset owners towards the proposed Legacy Loan Program.

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