BlackRock likely will remain an independent investment manager after Bank of America picks up a 50% stake in the firm through its proposed $50 billion acquisition of Merrill Lynch.
Bank of America announced the deal today, in which it will exchange 0.8595 shares of its stock for each common share of Merrill Lynch.
“BlackRock is an independent company and will remain that way,” said BlackRock spokeswoman Bobbie Collins. “Merrill Lynch is our largest shareholder. Ownership of the shares will be transferred (to Bank of America), but not the company. It will be business as usual.”
Ms. Collins said Merrill Lynch holds two seats on BlackRock’s board, which may be transferred to Bank of America. “Many details remain to be finalized,” she said. She added that investment strategy distribution agreements will be transferred to Bank of America and end in 2013.
Barbara Novick, BlackRock’s vice chairman and managing director, said it is too early to speculate whether BlackRock would absorb any of Bank of America’s asset management operations.
BlackRock managed $1.4 trillion, more than half for institutional investors worldwide, Bank of America managed a total of $589 billion as of June 30, with Columbia Management managing $423 billion and the balance managed by U.S. Trust.
An industry source who knows both firms and requested anonymity said it’s unlikely that Bank of America would try to merge its money management operations with BlackRock’s because the two businesses are so different. Columbia Management is primarily a retail mutual fund manager and U.S. Trust is an ultra high-net-worth investment manager. Both also are primarily focused in the U.S. The source said neither has been particularly successful in integrating and streamlining operations of smaller entities acquired by their predecessor companies.
BlackRock, on the other hand, successfully integrated a number of asset management firms, including Merrill Lynch Investment Advisors and State Street Research, into its investment teams, the source said.
“BlackRock was always run very autonomously from Merrill Lynch and likely will stay that way. In fact, I think most BlackRock people would say there’s no way they would touch Bank of America’s money management operations. They (BlackRock executives) are very good at figuring out what’s good, what they want to keep and what they want to dump.”
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