BlackRock to buy Barclays unit, forming $2.7-trillion titan

Money management giant BlackRock Inc. late Thursday agreed to buy Barclays Global Investors -- including the iShares exchange-traded funds -- creating the world’s biggest asset manager.

The deal would boost BlackRock’s assets to more than $2.7 trillion from $1.3 trillion, vaulting it well above its nearest rival, State Street Corp., which manages about $1.4 trillion.

The takeover is a potential coup for 56-year-old BlackRock Chairman Larry Fink, a UCLA grad who founded the company in 1988. The New York firm is best known for its fixed-income funds, a business that puts it head-to-head with Newport Beach-based Pimco.

With the purchase of San Francisco-based Barclays Global, which pioneered index-fund investing nearly 40 years ago, BlackRock would gain a much larger presence in the stock fund business, including via Barclays’ exchange-traded funds. Barclays' iShares unit is the industry leader in developing and managing popular stock and bond ETFs.

Reuters has some interesting factoids on Barclays Global and its historical connections to Wells Fargo & Co. and UC Berkeley. Go here.

Barclays Global is being shed by British banking titan Barclays as the latter seeks to raise capital to offset soaring loan losses.

BlackRock agreed to pay $6.6 billion in cash and 38.7 million of its shares for Barclays Global. The deal would give Barclays a 19.9% stake in BlackRock, which plans to rename itself BlackRock Global Investors.

BlackRock’s shares closed at $182.60 on Thursday, up $4.08, before the deal was announced, although it had been expected. The stock is up 36% this year.

Pimco, which is owned by Germany’s Allianz, manages about $800 billion. Pimco just this month launched its first bond ETF and plans at least six more, competing directly against iShares’ offerings.

-- Tom Petruno

Photo: BlackRock CEO Larry Fink. Credit: Carolyn Cole / Los Angeles Times

Comments

[Mike]

I thought John Bogle and The Vanguard Group pioneered the index fund in the mid-1970's.

[Tom Petruno]

@Mike: There were multiple pioneers in the indexing business in the early 1970s, including the Barclays folks, Bogle/Vanguard, and Rex Sinquefield at Dimensional Fund Advisors.

Tom Petruno

[Mike]

Makes sense Tom. I guess any of those folks could claim they were the first. I only mentioned it because I heard Mr. Bogle in a recent M* video interview correct the interviewer to the fact that he was the creator of the first index fund.

http://www.morningstar.com/cover/videocenter.aspx?id=295079

[Mike]

Sorry.. here's the correct link.

http://www.morningstar.com/cover/videocenter.aspx?id=295083