Don’t bet on a private equity firm buying Bank of America’s 34% stake in BlackRock.
BofA is reportedly considering selling its 34% holding in the world’s largest asset manager. Any buyer would require considerable heft since BlackRock has a $29.12 billion market capitalization. A bid would be valued at roughly $10 billion.
“That’s really pricey,” a banker says.
BofA has determined that its BlackRock stake, which it acquired as part of its Merrill Lynch buy in 2009, is a non-core asset, according to press reports. PNC Financial Services, which owns 24% of BlackRock, and Barclays, which has 20%, may also be looking to divest their holdings due to new regulatory requirements in the U.S., according to Bloomberg.
Officials for BlackRock and BofA declined comment.
At first glance, BofA’s stake in BlackRock may seems like a natural fit for PE firms like KKR, Blackstone, TA Associates and Hellman & Friedman, which would likely buy as a group. But BofA’s holding is a non-control stake that would require BlackRock’s approval to sell as one piece, a buyout executive says.
“It’s a 34% stake and you don’t get control and there is no hope you will ever have control,” a strategic source says.
Such a deal would not provide a way for PE firms to enhance the value of their holding or offer an exit strategy, the source says.
“I can’t imagine Larry Fink is looking for a PE partner,” the buyout source adds.
So who might buy the BlackRock stake? Fink, BlackRock’s chairman and CEO, may want a buyer that provides some sort of strategic advantage, the banker says. A large foreign bank that provides BlackRock access to Asia would fit that bill. Japanese banks, because of the strong currency advantage, could be interested. The Japanese Yen rallied Monday to 15 year highs against the U.S. dollar.
“BlackRock will look cheap to [the Japanese],” a second PE source says.
However, Japanese banks aren’t exactly busting down our doors in their search for U.S. asset managers, a source says. “But maybe [BlackRock] is fancy enough in terms of company and brand to attract them,” the person says.
Possible buyers include Sumitomo Trust, which owns Nikko Asset Management; Mitsubishi, which owns a stake in Aberdeen; and Nomura, sources say.
Another possible bidder could be Berkshire Hathaway Inc., the investment firm from Warren Buffet. But one source cautions that BlackRock shares aren’t cheap enough yet. BlackRock’s stock is off nearly 38% from its 52-week high of $243.80. On Tuesday, shares added $1.46 to $152.28 in morning trading.