ZURICH BlackRock BLK.N is to buy Credit Suisse's CSGN.VX exchange-traded fund (ETF) business that will give the U.S. asset manager greater scale in Europe.
The price tag on the deal, announced on Thursday, was not disclosed, but one source familiar with the matter put it at between $200 million (124.5 million pounds) and $300 million.
For Credit Suisse, the disposal marks another step to raise money to bolster capital in line with tough new requirements on banks after the financial crisis.
BlackRock, the world's biggest investment manager by assets, will increase its scale and distribution with this deal.
With 58 ETFs, Credit Suisse is the fourth-largest provider in Europe, with 5.5 percent market share as of November 30, according to ETFGI, a London-based ETF research firm.
Exchange-traded funds are baskets of securities, like mutual funds. But ETFs trade on exchanges, like individual securities, and carry lower fees than mutual funds.
Scale is key in ETFs. "The ETF business is generally a low-margin business which needs scale to make it attractive," said Bank Vontobel analyst Teresa Nielsen.
BlackRock is already the largest ETF provider in Europe, with more than 41 percent of the $318 billion market. Its 195 European iShares ETFs had $132 billion in assets.
The acquisition ... represents BlackRock's continued commitment to the Swiss market and underpins the importance we place on meeting the needs of our clients," chairman and chief executive Laurence Fink said.
Two ETF industry sources said BlackRock was likely paying a premium for the scale and distribution that it would gain from the Credit Suisse business, which they valued at between 150 and 200 million Swiss francs.
"Anyone not in the top three in Europe would be willing to sell their ETF business at the right price," said one ETF industry source.
Credit Suisse put the ETF business, which manages 16 billion Swiss francs in client funds, on the block in July as part of a plan to bolster capital by 15.3 billion francs. This included issuing convertible bonds and selling prime Zurich real estate and other assets.
In November, Credit Suisse said it was integrating its private banking and asset management divisions into a new wealth management unit to cut costs.
Credit Suisse's ETF business is the second international ETF business BlackRock has acquired in the past year after it bought Toronto-based Claymore Investments, a Canadian ETF operation, from Guggenheim Partners LLC, in March.
Credit Suisse shares were up 0.6 percent by 1224 GMT, compared with a 0.6 percent gain in the European banking index .SX7P.
Credit Suisse and BlackRock said they expected the deal to close by the end of June.
($1 = 0.9271 Swiss franc)