Page last updated at 09:45 GMT, Friday, 12 June 2009 10:45 UK

Blackrock in 8.2bn Barclays deal

Barclays headquarters in Canary Wharf

Barclays has agreed to sell its fund management division, Barclays Global Investors (BGI), to US money management firm Blackrock for £8.2bn ($13.5bn).

Blackrock is paying a mixture of cash and shares in a deal that will create the world's biggest asset manager.

Barclays staff who own stocks in BGI will share a windfall. Bob Diamond, the president, will get £16m.

Barclays has shunned government help, choosing to raise money privately, to help it weather the financial crisis.

If Blackrock does well, Barclays will benefit
Robert Peston
BBC business editor

The sale has been made to raise funds to protect Barclays against further losses on loans and investments it has made, according to BBC business editor Robert Peston.

He added that the sale would provide a bit more insulation from what other financial storms may lie ahead.

Asset giant

Blackrock's takeover of BGI should create a firm with combined assets under management of more than $2.7tn (£1.64tn) which is about the same as the total annual output of the UK.

The new company - in which Barclays will have a 19.9% stake - will be called Blackrock Global Investors.

Barclays expects to realise a net gain of $8.8bn on the sale.

"We are incredibly excited about the potential to significantly expand the scale and scope of our work with investors throughout the world. The combination of active and passive investments will be unsurpassed," said Laurence D. Fink, Blackrock chairman and chief executive.

Barclays' Bob Diamond said: "Our clients and our shareholders would benefit from the enhanced capability this proposed transaction would deliver."

Bidding war?

The proposed transaction means Barclays will scrap an earlier deal under which it sold a crucial part of BGI's business, iShares, to CVC Capital Partners for $4.4bn (£2.7bn).

It had agreed with CVC that it could scrap the deal if it received a better offer before 18 June.

It will now have to pay a $175m break fee to CVC - unless CVC makes a better offer for the whole of BGI, creating a bidding war.

IShares is a unit of BGI that specialises in exchange-traded funds, which are investment funds that are listed on a stock exchange.

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