SAN FRANCISCO (MarketWatch) -- BlackRock Inc. said late Thursday it has agreed to acquire Barclays Global Investors, including its iShares division, in a cash-and-stock deal that would create the world's largest fund manager, with over $2.7 trillion in assets, and drastically alter the financial industry.
Under terms of the deal, BlackRock /quotes/comstock/13*!blk/quotes/nls/blk (BLK 182.60, +4.08, +2.29%) would acquire BGI in exchange for 37.8 million shares of common stock and equivalents, and $6.6 billion in cash, the U.S. finance firm said in a statement.
Estimates of the transaction's total value ranged from $13.2 billion to $13.5 billion.
The deal, expected to close in the fourth quarter, will result in BGI parent, U.K. banking giant Barclays Plc /quotes/comstock/13*!bcs/quotes/nls/bcs (BCS 19.90, +1.25, +6.70%) /quotes/comstock/23s!a:barc (UK:BARC 299.00, -5.25, -1.72%) , holding a 19.9% economic interest in the combined firm, which will be called BlackRock Global Investors.
"As one, BlackRock and BGI will have a world-class product offering across the risk spectrum," BlackRock said in a statement.
Shares of Barclays closed Thursday up 6% at $19.90, while those of BlackRock rose more than 2% to close at $182.60.
BlackRock, the New York investment firm founded in 1988, is no stranger to blockbuster mergers.
The firm has been expanding in recent years through acquisitions, and in 2006, it snapped up Merrill Lynch Investment Managers for $9.6 billion.
Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 12.97, +0.99, +8.26%) , which has acquired Merrill Lynch, holds a sizeable stake in BlackRock, as does PNC Financial Services Group Inc. /quotes/comstock/13*!pnc/quotes/nls/pnc (PNC 42.43, +0.63, +1.51%)
Gone shopping
BlackRock had confirmed earlier this week that it was in talks with Barclays, though Barclays indicated at the time that it was holding talks with a number of parties.
Barclays in April agreed to sell iShares to private equity firm CVC Capital for $4.4 billion, though the deal included a "go-shop" clause allowing Barclays until June 18 to find a better offer.
BlackRock said in a statement that unless Barclays received a counter-offer from "that party" within five business days which "considers to match the terms of BlackRock's agreement to acquire BGI," the Barclays board will execute a purchase agreement with BlackRock and recommend it to shareholders for approval.
BlackRock has apparently managed to remain relatively stable during the course of the credit crunch and recession.
Meanwhile a sale of the lucrative, San Francisco-based Barclays Global Investors and its iShares unit was seen as a means for Barclays to be able to raise considerable funds without taking a government bailout.
"The ability to offer BlackRock's global mutual funds alongside iShares will create an unmatched ability to tailor portfolios for retail investors," BlackRock said.
IShares has over $300 billion in assets under management in more than 350 funds worldwide.
"IShares is a rapidly growing business, ranking among the top three selling mutual fund and ETF families for the last three years," BlackRock said.
Wall Street analysts have generally issued favorable opinions about the anticipated tie-up between BlackRock and Barclays, noting that a combined firm would likely be able to cut a significant amount of overlapping costs following a merger.
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