Bond Fund Giant, Merrill in Talks
Investors on Monday cheered the prospect of a marriage between brokerage titan Merrill Lynch & Co. and bond fund giant BlackRock Inc., driving both companies’ stocks higher.
Shares of BlackRock had their biggest gain in almost four years after the Wall Street Journal said Merrill Lynch was in talks to acquire a stake in the third-largest U.S. manager of bond funds. Both firms are based in New York.
The brokerage may announce as soon as today a deal to exchange its $544 billion-asset mutual fund subsidiary for a 49% stake in BlackRock, said a person familiar with the matter.
Merrill Lynch Chief Executive E. Stanley O’Neal would be offering BlackRock CEO Laurence Fink the chance to create a fund-management company with about $1 trillion in assets, combining BlackRock’s focus on institutional investors with Merrill’s industry-leading retail brokerage network.
In addition, an alliance with Merrill would substantially increase BlackRock’s reach in international markets.
“You have to go big or go home,” said Benjamin Phillips, a managing director at Putnam Lovell NBF Securities Inc.
A deal would “allow both sides to focus on their core strengths, while having a more diversified presence through each other’s products and offerings,” said David Haas, an industry analyst at Fox-Pitt Kelton.
BlackRock, which manages about $450 billion, had been in merger talks recently with Morgan Stanley, Merrill Lynch’s arch rival. But those discussions reportedly ended over the price.
BlackRock’s shares have soared nearly 50% since late October, including a jump of $10.48, or 8%, to $141.99 on Monday.
Merrill Lynch’s shares gained $1.04, or 1.4%, to $73.83 on Monday.
PNC Financial Services Group Inc., which owns 70% of BlackRock and would have to bless the deal, rose $2.01, or 3.1%, to $66.59.
Merrill Lynch spokesman Jason Wright declined to comment, as did BlackRock spokeswoman Kathleen Baum.
BlackRock now is the third-largest bond fund manager after Newport Beach-based Pacific Investment Management Co., which manages about $600 billion, and Legg Mason Inc.’s Western Asset Management division in Pasadena, which manages about $543 billion.
