What’s the BGI deal?

June 12, 2009

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).

3 comments so far | RSS Comments RSS

Is Lehman Brothers U.S. investment banking business also included in this deal? If so then it really is a brilliant move, one shot and two fat ducks bagged.


I wonder how this will impact State Street in the long run; while BGI and State Street competed on the asset management side of things State Street acted as the custodian and fund accounting service provider for much of BGI’s business. Will the new BGI move this to another custodian (BNY Mellon perhaps)?

Posted by Livin in the Sac | Report as abusive

Nikkei, this deal does not include the Lehmans investment banking business in the US that Barclays picked up last September from the administrators. That is part of Barclays Capital and the UK bank has indicated it wants to expand further in the investment banking arena.

Livin, no details on the relationship of BGI and State Street, although I do understand the stock lending business of BGI used to produce sizeable income for the company. Barclays was keen to continue that business and would have been able to if it had only sold iShares and not all of BGI. That no longer seems possible.

Posted by Chris Spink | Report as abusive

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