BlackRock has agreed to buy Barclays Global Investors (BGI), including its exchange traded fund platform iShares, in a cash and shares deal worth $13.5bn (£8.15bn).
The deal will see Barclays take a 19.9% stake in the combined firm, which will be renamed BlackRock Global Investors.
The combined firm will have assets under management in excess of $2.7trn and a combined workforce of 9,000 employees.
Under the terms of the deal, BlackRock will buy BGI in exchange for 37.8 million shares and $6.6bn of cash.
The firm says the ability to offer BlackRock's global mutual funds alongside iShares would improve its ability to tailor portfolios for retail investors.
BlackRock chairman and chief executive Laurence Fink says the deal would allow the firm to increase its focus on on asset allocation, multi-asset class solutions, fiduciary management, risk management and advisory services.
He says: "[The deal] will enhance our ability to offer comprehensive solutions and tailored portfolios to institutional and retail clients."
Barclays president Bob Diamond says the cultures and values of the two firms were "strongly aligned".
"Both of our organisations place great emphasis on teamwork, excellence and integrity," he says. "The two firms have worked together for over seven years through BlackRock Solutions, where BGI's U.S. fixed income group is already a client. This relationship will considerably ease integration as we go forward."
BGI chief executive Blake Grossman will serve as a vice chairman of the combined firm, head of scientific investing, and a member of the office of the chairman. Barclays chief executive John Varley and president Bob Diamond will join the combined firm's board of directors.
BlackRock says the cash portion of the purchase price will be funded through a mix of existing cash, committed debt facilities and proceeds from the issuance of equity securities to a group of institutional investors.
BlackRock has received commitments from a group of institutional investors to purchase 19.9 million shares at the closing of the transaction for a total of $2.8bn.
A group of banks, including Barclays, Citi and Credit Suisse, has committed to provide BlackRock with a new 364-day revolving credit facility of up to $2bn - to be drawn at closing to the extent necessary and repaid during the term from the proceeds of any capital raising transactions.
CVC Capital Partners - the firm that had agreed to buy BGI's exchange traded funds business, iShares in April - has been given five days to table a better offer.
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