NEW YORK (BLOOMBERG, REUTERS) - PNC Financial Services Group will sell its stake in BlackRock Inc, more than two decades after it bet on the business that became the world's largest asset manager.
PNC will exit its investment, worth about US$17.3 billion (S$24.5 billion), with a public secondary offering, it said on Monday (May 11). As part of the transaction, BlackRock will buy back US$1.1 billion of the shares directly from the firm. PNC holds 22 per cent of BlackRock's outstanding shares, making it the largest holder.
The separation comes 25 years after PNC bought BlackRock, severing it from alternative asset manager Blackstone Group in a US$240 million deal that Steve Schwarzman went on to call "a heroic mistake." The value of PNC's stake snowballed over time. A share of BlackRock cost US$14 when it debuted in 1999; its shares closed at US$493.11 on Monday.
As the gap between PNC's market value and BlackRock's widened - and as BlackRock soared above its peers - the lender decided it was the right time to exit, according to a person familiar with PNC's thinking. It comes amid widespread pain in the markets caused by the coronavirus pandemic that has seen PNC's stock plunge 36 per cent this year.
Exiting the BlackRock stake helps shore up PNC's balance sheet and possibly pave the way for an acquisition, said the person, who asked not to be named discussing the firm's reasoning.
Now is the right time to "unlock the value of our investment," PNC chief executive officer William Demchak, who is also on BlackRock's board, said in a statement.
The move enhances PNC's balance sheet and leaves the firm "very well-positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets," he said.
PNC has done deals before amid broader financial turmoil. It acquired National City Corp for about US$5 billion during the last global financial crisis.
The move further separates BlackRock from PNC's regulatory oversight, Credit Suisse analysts said in a note following the announcement.
Shares of BlackRock slipped nearly 3 per cent in after-market trading, as investors prepared for pressure from the offering, while those of PNC Financial rose 5 per cent.