Retail brokerage firm Merrill Lynch, Co. has agreed to combine its asset management business with money manager BlackRock, Inc., in exchange for a 50% stake in BlackRock. The transaction between BlackRock and Merrill Lynch, which comes weeks after failed talks between BlackRock and investment bank Morgan Stanley, will create a fund-management firm valued at $1 trillion and bring the brokerage firm’s stake to 49.8%, with 45% voting interest in the company.
The combination of BlackRock with Merrill Lynch Investment Managers is the largest transaction to date in the global asset management industry, with a deal valued at $9.5 million and combined assets under management of $544 million, according to research by Putnam Lovell NBF Securities. A distant second place is Citigroup’s sale of its fund business to Legg Mason last year for $3.7 million.
The deal has already been approved by the boards of directors of both companies and is expected to close in the third quarter of 2006.
Laurence D. Fink, CEO of BlackRock, will serve as chairman and chief executive officer of the combined company and Ralph L. Schlosstein will continue to serve as president and a director.
“Joining forces with Merrill Lynch Investment Managers represents a truly transformational opportunity – the combined company will have broad investment and risk management capabilities and extraordinary global scale that will enhance our collective ability to serve individual and institutional investors worldwide,” Fink said in a statement.
Merrill Lynch will have three seats on the board, with Stan O’Neal, the firm’s chief executive, expected to occupy one of them. Robert Doll, the chief investment officer at Merrill Lynch Investment Managers, will be vice-chairman of the new company.
The PNC Financial Services Group, Inc. – which bought BlackRock in 1995 and currently owns 70% of the company – will maintain a 34% share in the combined company, and approximately 17% will be held by employees and public shareholders.