BlackRock And Merrill Lynch Merge To Form $1 Trillion Investment Firm

by Phillip Morton, Investors Offshore.com

20 February 2006

BlackRock, Inc. has reached an agreement to merge with Merrill Lynch’s investment management business, Merrill Lynch Investment Managers, to create a new independent company that will be one of the world’s largest asset management firms, with nearly $1 trillion in assets under management.

Under the agreement, Merrill Lynch’s stake will go to 49.8%, and it will have a 45% voting interest in the combined company. The new company will operate under the BlackRock name and be governed by a board of directors with a majority of independent members.

The combined company will offer a full range of equity, fixed income, cash management and alternative investment products with strong representation in both retail and institutional channels.

The company will have a major presence in most key markets, including the US, the UK, Asia, Australia, the Middle East and Europe. Capabilities will include US and non-US products in each asset class, including products created in investment centers in the US, London, Edinburgh, Tokyo, and Australia. Various products will be available as separate accounts, open-end funds and closed-end funds.

The transaction, which has been approved by the boards of directors of both companies, is expected to close in the third quarter of 2006.

Laurence D. Fink, CEO of BlackRock, will serve as Chairman and Chief Executive Officer of the combined company, and Ralph L. Schlosstein will continue to serve as President and a Director. Robert C. Doll, President and Chief Investment Officer of MLIM, will become a Vice Chairman, CIO of Global Equities, and Chairman of the Private Client Operating Committee. According to BlackRock, this will ensure continuity of management.

Commenting on the merger, Mr Fink observed that: “Joining forces with Merrill Lynch Investment Managers represents a truly transformational opportunity – the combined company will have broad investment and risk management capabilities and extraordinary global scale that will enhance our collective ability to serve individual and institutional investors worldwide."

He continued: “MLIM and BlackRock are highly complementary, in terms of both expertise and culture. Together, we will benefit from a singular focus on investment and risk management, as well as a deep pool of talented professionals who share a commitment to teamwork, excellence and integrity."

"We will also benefit from an ongoing strategic partnership with Merrill Lynch as we work together to serve our shared clients. Lastly, we will move quickly to establish a robust operating platform that leverages our BlackRock Solutions capabilities and ensures a seamless transition for BlackRock and MLIM clients.”

Stan O’Neal, Chairman and Chief Executive Officer of Merrill Lynch noted that: “Having an expanded presence in the asset management business has been a strategic priority for Merrill Lynch for some time."

"We will gain what amounts to a half-interest in a firm twice the size of our unit, with enhanced growth prospects, both organically and through potential acquisitions, with its own publicly traded stock. Additionally, this transaction frees up significant capital for Merrill Lynch, which we can deploy to further enhance shareholder value," Mr O'Neal added.

On a combined basis as of December 31, 2005, the proposed company managed $286 billion in equity/balanced, $415 billion in fixed income, $208 billion in liquidity, $38 billion in alternative and real estate investments, and $44 billion in retail separately managed accounts.

Recommended