Barclays has held the stake for almost three years, a legacy of BlackRock’s $15 billion purchase of Barclays Global Investors, but Basel III regulations mean banks have to hold more capital against minority stakes in asset managers and other firms, making it less profitable.
“All this is just showing how difficult it is for banks to make a profit and sufficient RoE (return on equity) in the new regulatory environment. They are deleveraging or pursuing transactions like this to improve capital ratios,” said Richard Barfield, a director at PricewaterhouseCoopers.
Barclays said the shares would be sold by way of an offering and a related buyback by BlackRock of up to $1 billion of the stock. Bookbuilding was expected to take a couple of days before the price of the share sale is finalized, possibly on Wednesday, bankers said.
Barclays is set to make about 400 million pounds on the deal.
By 1510 GMT BlackRock shares were down 0.8 percent at $170.48. Barclays shares were up 2.1 percent at 179.9 pence in London, outperforming a 1 percent rise by the European bank sector index.
“The question was always would they sell ahead of Basel III fully coming in, so there’s a logic to it,” said Mike Trippitt, analyst at Oriel Securities in London.
Barclays holds BlackRock common stock and convertible stock representing a 19.6 percent economic interest in the firm, equivalent to about 35.2 million shares.
BlackRock bought BGI in a cash and share deal in June 2009, making it the world’s largest money manager, almost doubling its size. It was seen as a good deal for Barclays, giving it a much-needed capital boost at a time when all banks were under strain.
The deal also left BlackRock as one of the biggest shareholders in Barclays, with a 7.1 percent stake. Barclays said the future of that holding was a matter for BlackRock, and BlackRock declined to comment on its holding.
Barclays Capital, Morgan Stanley and Bank of America Merrill Lynch are joint bookrunners for the offer. A prospectus was filed by BlackRock on Monday