The deal will net Barclays $8.8bn in gains. The UK bank will retain a 19.9% stake in the combined business, to be called Blackrock Global Investors, and will maintain an ongoing commercial relationship with the company. The deal will beef up Barclays' capital and its Tier 1 capital ratio would improve by 1.5%, from 8.6% at the end of 2008. Barclays currently occupies the 15th place in the ranking of world banks by Tier 1 capital and sixth in western Europe.
The acquisition gives Blackrock a leading position in passive management, with about one third of institutional assets and just over half of retail assets engaged in passive strategies in the enlarged group. Experts say that, although strategically important, integrating a passive strategy into Blackrock's active management business will not be easy.
Furthermore, BGI has large economies of scale while Blackrock's business is much less scalable. The industry lacks a strong track record in successful mergers and acquisitions.
Barclays president Bob Diamond has released his personal investment in BGI and received $36m from the sale. Mr Diamond was consulted by the bank's board on the sale but did not vote.
