BlackRock deal might prod envious rivals to move

By Svea Herbst-Bayliss - Analysis

BOSTON (Reuters) - American asset managers woke up to a reordered world on Friday after BlackRock and Barclays Global Investors inked a blockbuster deal that may prompt many of them to consider mergers of their own.

BlackRock, already the largest publicly traded U.S. money manager with $1.3 trillion in assets, will pay $13.5 billion for BGI's $1.5 trillion in assets.

The deal puts a huge distance between the new company and its closest rivals, State Street Corp with $1.4 trillion, and privately held Fidelity Investments with $1.25 trillion.

"Fidelity is no longer the industry's 800-pound gorilla. We now have a new 16,000-pound gorilla," said Geoff Bobroff, president of Bobroff Consulting, a mutual fund advisory firm.

For the industry's biggest players, including Bank of New York Mellon and Vanguard, the move could hasten talk about how best to compete with the new BlackRock Global Investors in products like index funds and exchange traded funds where scale matters, industry analysts who follow the group closely said.

Analysts have long expected a fresh wave of mergers among fund managers after many were badly battered by last year's financial crisis that cost them billions in lost assets and forced thousands of job cuts.

"There are a lot of managers interested in acquiring something and building out the investment areas they don't have," said Robert Lee, analyst at Keefe, Bruyette & Woods.

Bank of New York Mellon was also interested in BGI, and because the company is flush with cash, some analysts speculate it may be next to announce a deal. "I wouldn't be surprised if they do something big relatively soon," said Michael Herbst, mutual fund analyst at Morningstar Inc.