BlackRock Inc.'s $375 million deal for State Street Research and Management Co. would bolster its institutional business and give it more depth in the equity business, which it has been trying to build, an analyst says.
The New York money manager, which is majority-owned by PNC Financial Services Group Inc., said Thursday that it will pay $325 million in cash and $50 million in stock for SSRM Holdings Inc., the parent of State Street Research and a subsidiary of MetLife Inc.
The deal is expected to close early next year and would turn BlackRock into one of the 20 largest money managers in the world, Laurence D. Fink, the chairman and CEO of BlackRock, said in a conference call.
Mr. Fink said BlackRock's strategy is to build both through acquisitions and organically. "This acquisition has good opportunities for product creation and opportunities for revenue and earnings growth," he said.
Geoff Bobroff, the president of Bobroff Consulting in East Greenwich, R.I., said the deal makes sense for both BlackRock and MetLife.
"It helps BlackRock grow their institutional business," he said. "The deal will add $45 billion to its institutional block of business and $8 billion to $9 billion to their fund business."
Mr. Fink said BlackRock, once the deal closes, will manage more than $325 billion for institutional clients - corporations, banks, insurance companies, and pension plans. BlackRock had $314 billion of assets under management at the end of July, and State Street Research had roughly $52 billion at June 30.
The deal "also makes sense for BlackRock because it gives them depth on the domestic equity side," Mr. Bobroff said. The company has mainly been known as a fixed-income specialist.
As for MetLife, Mr. Bobroff said State Street Research had been "the odd man out in the MetLife world" and had trouble selling proprietary products.
"State Street wasn't given the resources to be very successful for MetLife," he said.
BlackRock and MetLife also made a cooperation agreement to take effect after the deal closes. And MetLife may receive additional cash consideration, which could raise the purchase price by up to 25%, over the next five years, Mr. Fink said.
Mr. Fink said the deal would give BlackRock "more scale, more products, a larger distribution channel, and greater name recognition."
BlackRock would have the 17th-largest broker-directed mutual fund platform at deal closing, Mr. Fink said, and its fund products would be offered under the BlackRock name. He said he expects the integration to be completed a year from the closing date.
The PNC affiliate reported net income of $48 million for the second quarter, and State Street Research's net rose to $16 million, increases of 24% and 220%, respectively. State Street Research is unrelated to State Street Corp., the big banking company also in Boston.
"This transaction brings to BlackRock the benefit of SSRM's talented professionals as well as an important alliance with MetLife - both of which will further strengthen BlackRock's ability to work with clients to meet their investment and financial needs," Mr. Fink said in a statement.
Richard Davis, State Street Research's CEO, said in a press release, "... our combined asset management capabilities form a powerful presence...."
