Barclays backs BlackRock offer for BGI

Barclays said that the transaction would generate around $13 billion — rising to $14.2 billion based on Wednesday's closing price — and had the advantage of allowing the British bank to retain a stake in the business.

British bank Barclays PLC said Thursday that U.S. investment manager BlackRock Inc.’s offer for its asset management arm, Barclays Global Investors, was a “compelling proposal” that could generate as much as $14.2 billion pounds.

Barclays said that the transaction would generate around $13 billion — rising to $14.2 billion based on Wednesday’s closing price — and had the advantage of allowing the British bank to retain a stake in the business.

Barclays stock rose 3.9 percent to 349.5 pence on the London Stock Exchange.

BlackRock announced last month that it had made the offer for Barclay’s BGI arm, including its highly profitable iShares business, in a deal that would make it the world’s largest asset manager.

Barclays originally had planned to sell San Francisco-based iShares to CVC Capital Partners for $4.4 billion. But under a “go shop” clause in the agreement, Barclays had the option of hunting for a better offer.

Barclays Chairman Marcus Agius said Thursday that the British bank would receive $6.6 billion cash under the new deal, with the balance of the consideration consisting of nearly 38 million Blackrock Shares.

That will give Barclays a 19.9 percent stake in the enlarged Blackrock Group, which will be renamed Blackrock Global Investors.

“The board believes that the offer from Blackrock is a compelling proposal which allows Barclays to retain an ongoing interest in the potential upside from the larger combined business while unlocking significant capital in the short term,” Agius told shareholders at a meeting where shareholders were to vote on the proposal.

Barclays has said it will pay CVC a break up fee of $175 million for the scuppered deal.