Stan the man

15 February 2006 By Rob Cox Follow @rob1cox

At first blush it looks like Merrill is accepting a low price to hitch onto a market leading highvalue bond manager without control. But the deal values its asset management business at a big premium to Merrill s overall multiple. That creates value for its shareholders.

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Merrill Lynch and Blackrock announced on Wednesday that they are merging their assetmanagement businesses. The combined firm will be called Blackrock, and its current CEO, Larry Fink, will continue to run the business. Merrill Lynch will own 49.8% of the company, and have 45% of the voting rights. Pittsburgh bank PNC Financial will reduce its 70% stake to 34%. Public shares, and those held by Blackrock employees, make up the remainder.

The deal values Merrill Lynch Investment Managers at about $9.3bn, which is just under 16 times its pretax earnings for 2005. Based on 2005 figures, the combined firm will manage $992bn in assets $415bn in fixed income, $286bn in equity/balanced, $208bn in cash/liquidity, $44bn in retail separately managed accounts, and $38bn in alternative and real estate investments.

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