Investment bank Morgan Stanley is said to be negotiating to buy a controlling share of BlackRock, a New York-based institutional money manager controlling over $427.8 billion in assets, according to Reuters.
Spokesmen for both Morgan Stanley and BlackRock declined comment, but BlackRock shares spiked after news of the possible deal. By mid-afternoon Friday, shares traded at $125.29, up nearly 5% over Thursday's market close and a jump of nearly 15% over Wednesday's $110.90 end-of-day value, according to Nasdaq data.
PNC Financial Services spun-off BlackRock in 1999, although the Pittsburgh-based parent retains a 62% stake.
When Morgan Stanley Chairman and Chief Executive John Mack took control of the bank in June 2005, he announced plans to help grow the bank's value through the acquisition of hedge funds and other types of businesses that reliably deliver revenue.
In November, Morgan Stanley was said to have offered to purchase FrontPoint Partners, a $5 billion hedge fund based in Greenwich, Conn. The deal fizzled when the two sides failed to agree on price.
BlackRock, which on Thursday posted a 46% gain in its fourth quarter earnings, is one of the industry's fastest-growing money managers, making it an attractive option for Morgan Stanley, where the asset management segment lags behind competitors.
Yet one Morgan Stanley analyst, Chris Meyer, warned that BlackRock is overvalued. "While BlackRock continues to post strong flows, solid earnings growth and a healthy pipeline, we remain cautious," Meyer wrote in a memo Thursday. BlackRock shares trade 62 times higher than anticipated 2006 earnings, prompting Meyer to call it "too rich for our blood despite their good growth." Meyer's memo pegged the target share price at about $105.
Morgan Stanley stock dipped about 2.7%, or $1.60, in trading Friday mid-afternoon, while PNC was up about 2.1%, or $1.35.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.