BlackRock could make name in commodities with BGI deal

NEW YORK (Reuters) - U.S. asset manager BlackRock (BLK.N), known for its expertise in bonds and equities, has a chance to build a name in commodities next if it buys Barclays Global Investors, industry observers said on Tuesday.

BGI, owned by British bank Barclays (BARC.L), runs some of the most popular exchange-traded funds (ETFs), including those for commodities. BlackRock has been in negotiations to buy the company for between $12 billion (7 billion pounds) and $13 billion, people familiar with the talks said.

If the deal goes through, BlackRock's assets under management will swell to about $2.8 trillion from $1.3 trillion. It will also face competition from other commodity ETF providers like Boston's State Street (STT.N).

State Street runs SPDR Gold Trust, the world's largest bullion-backed ETF, while BGI owns the COMEX Gold Trust and I-Shares Silver Trust.

"The advantage BlackRock has with BGI is a name and business that will launch them into the very heart of the ETF world," said Michael Carty, an ETF veteran who is principal at New York's New Millennium Advisors.

"They will be going into the business as a 600-pound gorilla, not a novice, and that could help them shape the competition for commodity-based ETFs in the future."

According to industry data, more than $1 trillion of the $1.5 trillion managed by the San Francisco-based BGI is in the form of indexed assets. The company's I-shares make up about half the size of the U.S. ETF industry.

Analysts said BlackRock's success in managing its 2006 merger with Merrill Lynch's investment management business held it in good stead for the proposed deal with BGI.

"A lot of people have done mergers wrong in the asset management business but BlackRock is one firm that has done it right," said Michael Herbst, mutual funds analyst at Chicago's Morningstar.