When BlackRock acquired Barclays Global Investors in 2009 some of the payment was made in BlackRock common stock. Barclays remained a minority stakeholder in BlackRock as an investment over the past three years. With tightening capital requirements in accordance with new Basel laws coming into affect, Barclays needed to find extra capital. Barclays holds a $6.1 Billion investment in BlackRock and plans to sell it entirely.
To counter the possible negative impact this might have on BlackRock’s share price, BlackRock’s management has arranged to purchase back $1 Billion of this stake.
Barclays stake in BlackRock was a known risk and one that should be monitored closely in the upcoming months. A growing trend in the financial sector is the different ways firms are dealing with Basel capital ratio requirements. We expect this trend to continue through the end of 2012.
Timing does not seem to be a factor. Barclays needed the capital, therefore needed to sell their BlackRock investment regardless of BlackRock’s current market price.
S&P reaffirmed BlackRock’s credit rating as A+ with a stable outlook. S&P noted BlackRock’s operations remain strong and cash flows constant, following the Barclays announcement.