BLACKROCK´S LARGEST SHAREHOLDER SELLS 22% STAKE / THE FINANCIAL TIMES

BlackRock’s largest shareholder sells 22% stake

US bank PNC intends to offload $17bn holding in asset manager to raise cash for potential deals

Richard Henderson in Melbourne and Laura Noonan and James Fontanella-Khan in New York


Pittsburgh-based bank PNC has had its stake in BlackRock since 1995, during which time the asset manager — led by chief executive Larry Fink (above) — has risen to become the world’s largest © AFP via Getty Images


BlackRock’s top shareholder, PNC Financial, will sell its $17bn stake in the asset manager, freeing up the bank to pursue potential acquisitions.

PNC, a Pittsburgh-based bank, “intends to exit its full investment” in the world’s largest asset manager, BlackRock said on Monday.

PNC holds a 22 per cent stake in the company that it purchased in 1995, representing about 35m shares through common and convertible preferred stock.

PNC’s decision to sell comes as US banks set aside tens of billions of dollars to deal with potential losses, in the expectation that soaring unemployment and shuttered businesses will make it impossible for some borrowers to repay their debts.

PNC suffered a 28 per cent fall in net income for the first quarter, as loan-loss provisions increased almost fivefold to $914m.

“We feel the time is now right,” said Bill Demchak, PNC’s chief executive, of the sale.

He said PNC would realise “a substantial return on our investment, significantly enhancing our already strong balance sheet and liquidity".

Mr Demchak added that the deal would leave PNC "very well-positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets”.

“There's going to be a lot of disruption this year and there's going to be stuff to buy,” said a person familiar with PNC’s deliberations, adding that while the bank does not have a particular target in mind, it will have dry powder for “organic and inorganic growth” in its core lending business.

Another person said the move would also bolster the bank’s capital ratio.

Banking sector mergers have been few and far between in recent years despite predictions of consolidation by some executives and investors.

Last year, BB&T and SunTrust combined in a $66bn all-stock deal that created a commercial banking giant in the south-east of the US, with more than $400bn in assets.

“PNC will now have a treasure chest of capital that will provide downside support in the current environment as well as (one that) adds to strategic flexibility,” analysts at Jefferies wrote in a note to clients, adding that PNC “would be able to look at a wide range of potential bank targets”.

The removal of the group’s biggest shareholder further consolidates power at the company under Larry Fink, who founded BlackRock three decades ago and holds the roles of chairman and chief executive. Mr Demchak will quit the BlackRock board when the sale is complete.

PNC acquired a stake in BlackRock after a falling-out between Mr Fink and Stephen Schwarzman, chairman of Blackstone.

When Mr Fink founded the fund manager in 1988 it was initially launched under the Blackstone umbrella as Blackstone Asset Management.

Mr Schwarzman has since described the sale of his stake in the company as a “heroic” mistake.

BlackRock shares were down less than 3 per cent in after-hours trading.

The asset manager said it would buy $1.1bn of shares from PNC, bringing its share buybacks this year to $1.5bn — roughly the amount it aimed to purchase in the whole of 2020.

BlackRock’s share price has outperformed its listed US fund management peers for years as the company has grown and diversified its revenues, in part by expanding into technology.

PNC’s stock price jumped 6 per cent after the announcement, as investors in the bank welcomed a move that has been long awaited.

Selling now also has tax advantages because “it's hard to imagine the tax rate getting any better” under a different US administration, said one of the people familiar with its thinking.

PNC was advised by Citigroup, Evercore and Morgan Stanley.