Between Blackrock and a hard place

23 January 2006 By Rob Cox Follow @rob1cox

Does John Mack want to build an empire or create value for shareholders? If he wants the latter, buying Blackrock would be questionable. But a spinoff and merger of Morgan s asset management arm with Blackrock would reap many benefits. He should pursue this option.

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Morgan Stanley is in merger discussions with assetmanagement firm Blackrock, according to press reports. The deal could take the shape of an acquisition by Morgan Stanley for as much as $10bn, or a merger of its asset management arm with Blackrock, which would continue to exist as a publicly traded company managed by Larry Fink.

Blackrock, based in New York, has $452bn in assets under management, of which twothirds, $303bn, are fixedincome assets. Equities make up just over 8% of assets, and alternative investments 5.5%.

On Thursday, Blackrock reported fourthquarter and fullyear earnings for 2005. Net income for the fourth quarter increased 19% from the third quarter to $72m, and for the year increased 63% from 2004 to $223m. Pennsylvaniabased PNC owns 70% of Blackrock.

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