Three days after confirming deal talks with Barclays Global Investors, BlackRock Thursday night said it is buying BGI, including the iShares business, in a cash and stock transaction valued at about $13.5 billion. Under the terms of the deal, announced at 8:20 p.m., BlackRock is purchasing the San Francisco-based firm in exchange for $6.6 billion in cash and 37.8 million shares of common and common equivalents in BlackRock. The combined firm will be called BlackRock Global Investors.

The deal is expected to close in the fourth quarter. UK-based Barclays will have a 19.9 percent economic interest in the combined entity.

In April, Barclays announced it was selling iShares to private equity firm CVC Capital Partners for $4.4 billion (see The MFWire, 04/09/09).

"The Board believes that the new offer for the whole of BGI as presented by BlackRock delivers superior benefits to both shareholders and clients," said BGI CEO Blake Grossman in a letter to clients posted on BGI's Web site on Thursday.

CVC has five days to match BlackRock's offer.

"While iShares would have been very successful as a stand-alone unit, we are confident in its ability to prosper when supported by the resources of the combined entity, much as it has flourished as part of BGI," Grossman said.

Grossman will serve as vice chairman of BlackRock Global Investors and head of scientific investing.

Citi and Credit Suisse served as lead financial advisors to BlackRock. Others that provided additional advisory support include Banc of America Merrill Lynch Securities, Morgan Stanley, and Perella Weinberg Partners. Skadden, Arps, Slate, Meagher & Flom served as BlackRock's legal counsel.

The combined firm will have more than 9,000 employees in 24 countries.

"We have long held BGI in the highest regard, and know that our cultures and values are strongly aligned," said BlackRock CEO Larry Fink. "The two firms have worked together for over seven years through BlackRock Solutions, where BGI's U.S. Fixed Income Group is already a client. This relationship will considerably ease integration as we go forward."

"This relationship offers the opportunity to form a closer relationship between our investment banking and wealth management business and BlackRock," said Barlcays president Robert Diamond, Jr. 

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