What’s the BGI deal?
Barclays will look a whole lot healthier after securing $13.5 billion from BlackRock for its crown-jewellish BGI asset-management arm. This is the same Barclays that turned down aid from the British government and bought defunct Lehman Brothers’ U.S. investment banking business in September, giving it that heroic posture of a down-but-not-out, maybe somewhat punch-drunk prize fighter — Britain’s own Rocky Balboa. Now, as far as Chief Executive John Varley is concerned, BGI-less Barclays is one of the best-capitalized banks in the world.
Investors are cheering Barclays on. Its share price has soared more than fivefold in the last three months, after crashing to a 24-year low on fears that it might need taxpayer funds.
The deal makes BlackRock the world’s biggest asset manager. Though the wealthy of the world are hurting in the recession along with the paycheck-to-paycheck crowd, it’s hard to see Barclays staying in the back seat of the lucrative asset-management market for long. Under the cash-and-shares deal, Barclays takes a 19.9 percent stake and two seats on the board of the enlarged group, to be called BlackRock Global Investors (giving the new firm the added bonus of not having to change BGI’s stationery).