Barclays in talks with BlackRock

Barclays is in talks to sell Barclays Global Investors, the bank said yesterday, with US fund manager BlackRock the frontrunner to land the asset manager for about €8.5 billion.

BlackRock and Bank of New York Mellon are both in talks to buy BGI in a deal that might come early this week, people familiar with the matter said.

The deal could see Barclays take a stake of up to 20 per cent in the enlarged asset manager, according to the sources, who asked not to be named as the talks are confidential.

Barclays said yesterday it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. Blackrock also confirmed the talks but both companies said issues remained that could derail a deal.

San Francisco-based BGI is the world's biggest fund manager with €1 trillion in assets under management and would more than double the size of BlackRock.

Barclays agreed to sell iShares, which is part of BGI, to buy-out house CVC for €3.1 billion in April, but a "go shop" clause allows it to seek higher offers by June 18.

BlackRock is likely to get funding for a deal from Middle East investors, possibly including some Barclays shareholders, according to media reports.

The Qatar Investment Authority and Adia, the government investment arm of Abu Dhabi, are in talks alongside Kuwait's KIO to inject €2.1 billion in BlackRock for a 12 per cent stake, the Sunday Telegraph said.

QIA bought shares in Barclays last year and could own a stake of over 12 per cent if capital instruments and warrants are converted.

Barclays is likely to get two seats on BlackRock's board if it completes a deal, one of which is likely to go to Bob Diamond, president of the bank and head of BGI, the Telegraph said.