Barclays confirms BlackRock merger talks
Barclays has confirmed it is in talks with BlackRock about merging its funds management arm with the US global manager.
In a statement released overnight, Barclays said it had been in discussion with various parties including BlackRock over iShares and Barclays Global Investors (BGI).
"The discussions are not yet concluded and there are a number of significant open issues which could affect the nature and terms of any transaction," the statement said.
"There is no certainty that these discussions will result in Barclays concluding a different transaction than that announced on 9 April with CVC regarding iShares."
According to reports in London, the talks with Black Rock also involve the Qatar Investment Authority and bodies from Abu Dhabi and Kuwait.
If the deal proceeds, BGI would be rolled into the combined funds management group which would have about $US2.81 trillion of assets.
The funds management arm of Barclays is being valued at about $US13 billion, and with a cash injection into the new merged entity, the UK bank could end up holding a 20 per cent stake.
The three Middle Eastern investment bodies would inject $3 billion into the deal in return for a 12 per cent stake.
Last month Barclays agreed to sell its exchange-traded funds business iShares to CVC Capital Partners for $US4.4 billion.
However, that deal may now fall over as Barclays has the right to accept higher offers for the business.
CVC will receive $US175 million as a break fee if the deal doesn't go ahead.
Barclays has also been subject to various moves in global financial markets as a major shareholder sold down their stake in the British bank last week.
The International Petroleum Investment Company, which is headed by Sheikh Mansour bin Zayed al-Nahyan, a member of the Abu Dhabi royal family, made a profit of about $US2.3 billion from the sale of 1.3 billion Barclays shares.
The Sheikh had taken a stake last year to help the British bank avoid nationalisation in wake of the financial crisis.
The BlackRock deal is expected to be funded through issuing new equity, although how this will affect Bank of America's 50 per cent stake in the global fund manager is not clear.
While the deal with Barclays is tipped by London analysts to go ahead, a rival bid for the UK fund management arm has not been ruled out.
Barclays has held talks with Bank of New York Mellon and those discussions are believed to be still ongoing.
However, the June 19 deadline for selling Barclays Global Investors has made a counter-bid appear unlikely.
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