Barclays in BGI talks, $12 billion BlackRock deal seen

By Steve Slater

LONDON (Reuters) - Barclays Plc (BARC.L) is in talks to sell Barclays Global Investors (BGI), the British bank said on Monday, with U.S. fund manager BlackRock the frontrunner to land the asset manager for about $12 billion.

BlackRock (BLK.N) and Bank of New York Mellon (BK.N) are both in talks to buy BGI in a deal that might come early this week, people familiar with the matter said.

The complex deal could see Barclays take a stake of up to 20 percent in the enlarged asset manager, according to the sources, who asked not to be named as the talks are confidential.

"It sounds like a deal is coming and the price is undeniably attractive," said Ian Gordon, analyst at Exane BNP Paribas.

"It's an opportunity to realize a premium price for a business that has delivered exceptional growth but might be expected to grow at a slower pace from here, and also bolster capital ratios," he added.

Barclays said on Monday it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. Blackrock also confirmed the talks but both companies said issues remained that could derail a deal.

San Francisco-based BGI is the world's biggest fund manager with $1.5 trillion in assets under management and would swell BlackRock's assets to $2.8 trillion, double the amount managed by nearest rival State Street (STT.N).

BGI is staffed by academics from a range of disciplines from economics to engineering, attracting graduates from the nearby University of California at Berkeley. They have helped the staid index-tracking fund manager shift to more active and lucrative management, and many will land windfalls if a deal is reached.