Barclays has agreed to sell its fund management division, Barclays Global Investors (BGI), to US money management firm Blackrock for £8.2bn. BlackRock is paying a mixture of cash and shares in a deal that will create the world's biggest asset manager. 

The purchase agreement will also see BlackRock acquiring the market-leading ETF platform, iShares, from Barclays PLC. The combination of BlackRock and BGI would bring together market leaders in active and index strategies to create the preeminent asset management firm operating under the name BlackRock Global Investors. The transaction would create an independent and fully integrated asset management firm with combined assets under management of over $2.7 trillion. The combined firm will have unparalleled talent, analytical tools, and scale to deliver liquidity, global presence, and local market insight to clients. BlackRock will continue to be deeply committed to generating alpha as its number one priority for all actively managed products, as well to delivering highly efficient beta in passive strategies.

Under the agreement, it was allowed to scrap the deal if it received a better offer before 18 June. At the closing of this transaction, which is expected to occur in the fourth quarter, Barclays will hold a 19.9% economic interest in BlackRock. The two firms will seek to expand their relationships in investment banking and wealth management. At closing, BlackRock will have more than 9,000 employees in 24 countries and have a meaningful presence in all major markets around the world.

Blake R. Grossman, Global CEO of BGI, commented, “BlackRock Global Investors will create significant new opportunities for the talented employees of both companies, as we help our institutional and retail clients manage their toughest investment challenges. The two firms mesh well – and I have every confidence we will smoothly integrate into one organisation.”

For his part, Bob Diamond, Jr., (PICTURED) President of Barclays PLC, said: “This relationship offers the opportunity to form a closer relationship between our investment banking and wealth management business and BlackRock. The strength and breadth of BlackRock’s combined platform will deepen our collaboration in serving clients worldwide.”

The Barclays staff, who own 4.5% of BGI, will share a £365m windfall. Bob Diamond will get £16m. Barclays has shunned government help, choosing to raise money privately, to help it weather the financial crisis.