PNC Bank Corp.'s wholly owned investment manager, BlackRock Inc., is seeking more room to grow by going public.
BlackRock expects to be the fifth-largest publicly traded investment manager in the United States after the offering, according to a registration statement filed Thursday with the Securities and Exchange Commission. PNC would remain the majority owner.
Being publicly held would let BlackRock expand without having to turn to the banking company. After BlackRock goes public, its acquisitions would be only indirectly dilutive to PNC stock, an investment banker said. More importantly, investment professionals at acquired firms are less apt to stick around if compensated with bank stock.
"The investment manager is going to want some rewards for benefits he controls," he added.
Banking companies have a spotty history owning investment managers, often losing personnel who sought autonomy and better compensation - usually in the form of revenue sharing and equity.
Many companies, banking and otherwise, have come to realize they need not completely own a business to be in it, said Robert M. Tetenbaum, executive vice president of First Manhattan Consulting Group in New York.
"What is representative of half of the investment products sold by banks now? Annuities. Do they own the insurance company? No," he said.
The net proceeds of the BlackRock offering would be used to pay back some debt under a $175 million revolving credit line from PNC, as well as for further expansion.
"As one of relatively few publicly traded investment management firms, we will be better able to participate in future industry consolidation," the registration statement said.
BlackRock has grown internally at a healthy clip. When Pittsburgh-based PNC bought the investment firm in 1995, BlackRock managed $24 billion of assets, mostly in fixed-income. By yearend 1998, it had $131 billion under management.
Assets surged last year when PNC moved all its investment management business into the New York shop, led by Laurence D. Fink. Included in the shift were PNC's proprietary mutual funds, which adopted the BlackRock name and make up the most of the equity assets under management at the subsidiary.
The stock funds had $12.1 billion under management at yearend. BlackRock also has a large base of money market mutual funds, $35.7 billion at yearend, as well as $13.9 billion in fixed-income. The 75 funds in the BlackRock family are close to half of the assets managed and generated $162.5 million of fee revenue last year, versus $101.4 million from separate accounts.
PNC and BlackRock officials could not comment, since both are in a regulatory quiet period. Mr. Fink told American Banker in early April that BlackRock raked in $16.1 billion of additional assetsto manage in the first quarter. "We just had an extraordinary quarter," the chairman and CEO said at the time, adding, "We're growing as fast as I ever remembered."
Mr. Fink had said the bank's ownership was incidental to new business development by BlackRock, though "it helps when there's a client in PNC's footprint."
