Why Bank of America Offloaded Its BlackRock Stake

BlackRock (BLK), the world's largest publicly traded asset management firm, recently agreed to buy back Bank of America's (BAC) remaining 7% stake in the company for about $2.5 billion. The transaction involves an exchange of 13.6 million Series B convertible preferred shares at $187.65 per share, which is at a 3.6% discount to the average closing price for the 15-day period prior to the announcement. BlackRock plans to fund the purchase with the available cash and $2 billion of commercial paper, medium-term and long-term debt.

In 2006, Merrill Lynch sold its asset management division to BlackRock for a 49.8% stake in the latter. Bank of America came to acquire a 34% stake in BlackRock via its purchase of Merrill Lynch during the financial crisis in 2008. In November 2010, Bank of America sold around 34.5 million shares in a secondary sale, only this time, BlackRock chose to buy back Bank of America's remaining stake in the company. We value BlackRock with a $205 Trefis price estimate of its stock.



What could be the rationale behind the transaction?


Asset management is not considered strategic to Bank of America's core businesses in retail banking, home lending and capital markets. The proceeds from the sale could help Bank of America resolve the mounting claims tied to defective home loans from mortgage buyers, insurers and regulators as a result of the purchase of Countrywide Financial in 2008.

What will the impact be to BlackRock's stock?

Although BlackRock's debt burden will increase, the size of the share purchase falls within the limits that prevent it from altering BlackRock's credit rating, so payments on the additional debt will provide a partial tax shield and lower the cost of capital for BlackRock. We expect the transaction to have negligible impact on BlackRock's stock since it only restructures BlackRock's balance sheet, and share buybacks often send a positive signal to the market that management is confident on the direction of the stock and its ability to generate cash for future needs.

View our detailed analysis for BlackRock here.

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9 Comments

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rdins4

Make sure everyone clicks the report abuse buttons on the spammers.

June 05 2011 at 11:38 AM Report abuse rate up rate down Reply
Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Case No: 050200074982008 Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government" in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and those responsible will not be accepted civil servants here just because you say you are here to do the right thing.

Pages 6 and 10 of the “Basics of Corporations” Attachment should be cited.

This Evidence Solidifies my Rule Violation Claims involving the: 21st Century Act, Writ of No Exita, and "Domination" of a "S Corporation" Owner which should support an “Ultra Vires Act” Injunction request for Court or State “Action”.

The Evidence will also back claims of: Racketeering, Extortion, Pandering, and Theft.


Here are the Web Addresses to (4) Online News Stories about the same "Military Foreclosure" Cases that upon Investigation by the Court and Prosecutors led from other Investment Banks back to Bank Of America and “Saxon Mortgage Services” proving my Claims of the entire Federal Banking System being under My Private Ownership through Bank Of America.


Bank of America, JP Morgan Chase, Wells Fargo, CitiGroup, Ally Financial, and Deutsche Bank listed:

http://www.huffingtonpost.com/2011/05/16/foreclosure-fraud-audit-false-claims-act_n_862686.html


JP Morgan Chase and "Saxon Mortgage" Listed:

http://news.businessweek.com/article.asp?documentKey=1377-akVZL28v424w-5S5A7C9214357GO32JC27LP6A5


Bank Of America and "Saxon Mortgage" Listed:

http://realestate.aol.com/blog/2011/05/27/improper-military-foreclosure-victims-awarded-settlement/?icid=main7Cdl77C214568


Bank Of America, Morgan Stanley, "Saxon Mortgage" listed:

http://www.bloomberg.com/news/2011-05-26/bofa-morgan-stanley-settle-u-s-allegations-over-foreclosures-on-soldiers.html

June 04 2011 at 10:01 PM Report abuse rate up rate down Reply
michealklatt

No. You are under no obligation to remain with your current lender. But it is a good idea to let them know what you're planning to do so they'll offer you their best rate. If you need quotes from other companies search "Mortgage Refinance 123" they found me the lowest refinance rate i could get.

June 01 2011 at 7:27 AM Report abuse rate up rate down Reply
trbgd

Black Rock is much smarter than BAC. BR is one of the smartest investment firms in the world and we know BAC is not too smart from our recent history. Good move BR

May 31 2011 at 4:37 PM Report abuse rate up rate down Reply
Joseph2237

Condley is half right BOA was forced to takeit over but they got twenty billion in the process. Sounds like BOA can't or won't stop Countrywide from buying bad deals. Or, Countryside doesn't want BOA regulator watching their deals. This whole toxic asset business was handled all wrong. We gave out hundreds of billions and those assets are still the 800 pound elephant in the room. Toxic asset are probably why BOA wants to put distance from Countrywide.

May 31 2011 at 12:27 PM Report abuse +2 rate up rate down Reply
Condley

Take note, BOA was forced by the government to take over Countrywide. BOA never wanted Countrywide in the first place, but a Countrywide failure was perceived by the government as a potential for an economic collapse. The government was shaking in their boots. The failure of Fannie and Freddie along with AIG and Countrywide had the government in a panic. So they threatened many of the major banks into cooperating "or else". This whole mess was the fault of your government forcing banks, under the CRA, to loan money to subprime borrowers with risky credit. None of the financial mess would have happened if the government had stayed out of the so called "affordable houseing" business. Of course the politicians don't want the general public to know the truth. They will spin it and lie like a rug to make you believe it was the fault of the "evil rich". Politicians will be the ruin of this nation.

May 31 2011 at 11:06 AM Report abuse +1 rate up rate down Reply
1 reply to Condley's comment
bggdg

The social engineers f'ed up once again. Which, of course, means they need a scapegoat. The saddest part is the number of sheeple willing to believe anything they are told by these mouth-breathing, knuckle-dragging goons who are their true attackers.

May 31 2011 at 12:01 PM Report abuse +2 rate up rate down Reply
Dorina

why does BAC get to play with my tax money and how come I don't get a return on the profits they rack up using, again, my money?

May 31 2011 at 9:32 AM Report abuse rate up rate down Reply
Dorina

more blah blah blah....just spell it out. this just means that most of us are screwed - still.

May 31 2011 at 9:31 AM Report abuse +2 rate up rate down Reply
1 reply to Dorina's comment
bggdg

Screwed how? And why?

May 31 2011 at 10:02 AM Report abuse -1 rate up rate down Reply
ctubuh

as usual...watch out...someone is going to get very rich and a lot of people are going to get very poor.....and our goofy politicians will come up with the usual bulls...

May 31 2011 at 9:13 AM Report abuse rate up rate down Reply
1 reply to ctubuh's comment
bggdg

How does BofA selling it's stake in an investment management firm impoverish others?

May 31 2011 at 10:04 AM Report abuse rate up rate down Reply
Don

Countrywide was a PIG in a poke,

May 31 2011 at 8:19 AM Report abuse +3 rate up rate down Reply