Finance and Economic

Barclays Plc is in talks to sell Barclays Global Investors (BGI), the British bank said on Monday, with U.S. fund manager BlackRock the frontrunner to land the asset manager for about $12 billion.

BlackRock and Bank of New York Mellon are both in talks to buy BGI in a deal that might come early this week, people familiar with the matter said.

The complex deal could see Barclays take a stake of up to 20 percent in the enlarged asset manager, according to the sources, who asked not to be named as the talks are confidential.

“It sounds like a deal is coming and the price is undeniably attractive,” said Ian Gordon, analyst at Exane BNP Paribas.

“It’s an opportunity to realize a premium price for a business that has delivered exceptional growth but might be expected to grow at a slower pace from here, and also bolster capital ratios,” he added.

Barclays said on Monday it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. Blackrock also confirmed the talks but both companies said issues remained that could derail a deal.

San Francisco-based BGI is the world’s biggest fund manager with $1.5 trillion in assets under management and would swell BlackRock’s assets to $2.8 trillion, double the amount managed by nearest rival State Street.

BGI is staffed by academics from a range of disciplines from economics to engineering, attracting graduates from the nearby University of California at Berkeley color business cards. They have helped the staid index-tracking fund manager shift to more active and lucrative management, and many will land windfalls if a deal is reached.

Barclays agreed to sell iShares, which is part of BGI, to buy-out house CVC for $4.4 billion in April, but is allowed to hunt for better offers until June 18.

By 1150 GMT (7:50 a.m. EDT) Barclays shares were down 2 percent at 279.25 pence, underperforming a weaker European bank sector, and valuing the bank at just under 24 billion pounds ($38 billion).

MIDEAST FUNDING?

Bankers told Reuters last month that Barclays would likely sell BGI if offers approached $12 billion.

BlackRock is likely to get funding for a deal from Middle East investors, possibly including some Barclays shareholders, according to media reports.

The Qatar Investment Authority (QIA) and Adia, the government investment arm of Abu Dhabi, are in talks alongside Kuwait’s KIO to inject $3 billion into BlackRock for a 12 percent stake, the UK’s Sunday Telegraph newspaper said.

BlackRock, founded in 1988, had a market value of just over $21 billion at Friday’s close. Bank of America owns 49 percent of it, stemming from a 2006 deal when Merrill Lynch, now owned by Bank of America, sold it its fund unit. 

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