BlackRock confirms talks with Barclays to buy BGI

BlackRock Inc. confirmed this morning that it's in talks with Barclays PLC to acquire the London-based company's $1 trillion money management unit, Barclays Global Investors. Reports about a possible BlackRock/BGI deal surfaced on Friday suggesting that New York-based BlackRock — already the largest publicly traded money manager in the United States — was close to a deal to buy BGI of San Francisco, including its iShares unit. In a statement today, BlackRock officials confirmed that it had indeed “engaged in discussions” with Barclays, and said that “the negotiations are ongoing.” BlackRock added the caveat, however, that “there is no certainty that any transaction will be agreed upon or, if agreed upon, completed.” The potential merger, which was first reported by the Financial Times' Alphaville blog on Friday, could be valued at more than $10 trillion. The combination of BlackRock and BGI would create the largest money management company in the world, by far, with roughly $2.2 trillion in assets. Barclays announced in April an agreement to sell its iShares business to Blue Sparkle LP, a new limited partnership established by CVC Capital Partners Group, a Luxembourg-based private-equity firm, for about $4.4 billion. The sale agreement, however, includes a “go-shop period” that expires on June 18. During the period, Barclays can solicit or consider proposals for a superior transaction involving iShares and potentially other related businesses. Last month, rumors surfaced that The Vanguard Group Inc. of Malvern, Pa., had made a $5 billion bid to purchase iShares from Barclays. But industry experts said they found the rumor to be highly suspicious. Vanguard already has its own exchange traded funds, and it would be difficult to merge operations, they said. A deal with BlackRock makes more sense. “It could be a powerhouse combination,” said William E. Koehler, chief investment officer of ETF Portfolio Solutions Inc., a Leawood, Kan.-based advisory firm with $40 million in assets. Neither Barclays nor Vanguard would comment on the rumors.