NEW YORK - In a deal with broad ramifications for the securities industry, retail brokerage giant Merrill Lynch & Co. Inc. is in talks to trade its asset-management business for a large stake in money manager BlackRock Inc., according to reports published Monday.
The deal would transform BlackRock into one of Wall Street's top money managers, with an asset base of around $1 trillion, according to The Wall Street Journal and The New York Times. Both papers said the deal could be completed this week, citing unnamed sources close to the discussions.
The Journal said the deal under discussion would give Merrill a 49 percent stake in BlackRock, whose market capitalization was $8.4 billion on Friday. But it warned that although an announcement could come today or on Wednesday, it is possible the deal may not be completed.
BlackRock and Merrill Lynch did not return calls seeking comment.
News of the discussions comes just weeks after rival Wall Street investment bank Morgan Stanley ended widely reported discussions for obtaining a stake in BlackRock and as more and more top-tier Wall Street firms look to smaller, more specialized competitors for alliances or acquisitions.
"Deals like this allow both sides to focus on their core strengths, while having a more diversified presence through each other's products and offerings,'' said David Haas, an industry analyst at Fox-Pitt Kelton. "I fully expect more activity in deals like this as we roll through the business cycle.''
BlackRock's strength in fixed-income asset management dovetails well with Merrill Lynch's traditional focus on equities in its asset management strategies, Haas said. In addition, an alliance with Merrill would substantially increase BlackRock's reach in international markets.
Shares of BlackRock have soared in recent months and jumped another $10.48, or 8 percent, to $141.99 on Monday, above the high end of the stock's previous 52-week range of $69.38 to $138. Shares of Merrill Lynch rose $1.04 to $73.83.
Both BlackRock and Merrill Lynch are coming off very strong financial performances in 2005.
Since it was founded by Chairman and Chief Executive Lawrence Fink in 1988, BlackRock has grown rapidly to become one of the largest U.S. asset managers. The company generated $233.9 million in earnings last year, or $3.50 per share, up 63 percent from 2004. Assets under management rose 6 percent to $453 billion as annual revenue ballooned 64 percent to $1.19 billion.
Merrill Lynch earned a record $5.2 billion, or $5.27 per share, in 2005, up 18 percent from 2004. Annual revenue rose 18 percent to $26 billion in 2005.