Bank of America to sell much of BlackRock stake

By Ross Kerber and Emily Chasan

BOSTON/NEW YORK (BestGrowthStock) – Bank of America (BAC.N: ) plans to sell more than half its stake in BlackRock Inc(BLK.N: ), the companies said on Wednesday, putting an end to months of speculation about how the bank would begin to reduce its big stake in the world’s largest asset manager.

Under the share sale, BlackRock plans to offer some 42 million shares, allowing Bank of America and PNC Financial Services Group (PNC.N: ) to reduce their stakes in the New York-based firm.

BlackRock shares fell as much as 5.1 percent on Wednesday as analysts said it could be somewhat cumbersome for the company to push so many shares into the market. But many also felt it would also be a long-term positive for the firm because it clarified the banks’ intentions.

Tighter bank capital regulations under Basel III have long been expected to force the banks to shed their ownership stakes in BlackRock.

In a note to investors, Nomura Securities analyst Glenn Schorr said he expected that while the offering “will weigh on the stock in the near term, we think it is a long-term positive as it removes an overhang on BLK shares.”

Shares of BlackRock, which oversees about $3 trillion in client assets, have lagged the rest of the asset management industry this year, amid concerns that share sales would be a drag.

BlackRock will offer the shares under a previous registration statement.

As part of the offering, Bank of America will offer 34.5 million shares, reducing its stake in BlackRock to as little as 12.6 percent of the company from 33.9 percent previously, according to an offering document.

PNC Financial Services Group will offer up to 7.5 million shares, BlackRock said, reducing PNC’s ownership of BlackRock to 20.3 percent from 24.3 percent. PNC has been a longtime BlackRock shareholder.

William Katz, an analyst at Citigroup, said in a note to clients the deal could be priced as soon as next week.

Bank of America, based in Charlotte, North Carolina, in the past has declined to comment on what it planned to do with the big stake in BlackRock, which it acquired with its purchase of investment bank Merrill Lynch & Co in 2008.

Bank of America spokesman Jerry Dubrowski said the transaction was consistent with the bank’s strategy to sell “non-core assets” to focus on traditional lending businesses. In the last year, the bank has sold roughly $10 billion in assets, including its stakes in South American and Latin American banks.

Bank of America’s sales also were part of its $45 billion U.S. government bailout aid repayment, which required the bank to raise $3 billion in capital through asset sales. For Bank of America, the sale could potentially boost its Tier 1 capital ratio by 6 basis points and free up its capital for other opportunities, analysts at Sandler O’Neill said in a note to clients on Wednesday.

PNC said in a statement that it still considers BlackRock to be a “key component” of its strategy.

“Adjusting our stake in BlackRock provides a unique opportunity to better align our investment to our risk and capital management philosophy,” a PNC spokesman said in a statement.

Based on Wednesday’s market price for BlackRock shares, the sale of 42 million shares of common stock would raise about $7 billion to be divided between the banks.

BlackRock shares were off 4.3 percent at $165.63 in afternoon trading on the New York Stock Exchange. Bank of America shares were off about 1 percent at $11.50.

(Reporting by Emily Chasan and Ross Kerber, additional reporting by Joe Rauch. Editing by Robert MacMillan, Bernard Orr)

Bank of America to sell much of BlackRock stake