BlackRock Inc.'s reported plan to buy State Street Research and Management Co. should give it more strength on the equity side but not affect its relationship with majority shareholder PNC Financial Services Group Inc., analysts said.
The deal could be a good one for BlackRock, which has $238 billion of assets under management, they said.
Citing unnamed executives, Wednesday's Boston Globe reported that BlackRock Inc. was close to a deal for the State Street Research unit of MetLife Inc. PNC has owned 71% of the New York investment company since 1995. BlackRock employees and the public own about 29%.
State Street Research spokeswoman Alyson Riley said the company does not comment on market rumors. BlackRock chief financial officer Paul Audet also said his company would not comment.
Gerard Cassidy, an analyst at the RBC Capital Markets unit of Royal Bank of Canada, said, "State Street Research would be a fine acquisition for BlackRock, as BlackRock's expertise over the years has been founded in fixed-income." The Boston fund company has $51.7 billion of assets under management.
BlackRock absorbed PNC's equity business but has "not been able to bring it up to the level of expertise and profitability of the fixed-income business," Mr. Cassidy said. "This acquisition will go a long way into raising BlackRock's presence in the equity management business."
The deal's potential strengths suggest that the report is true, he said. "I would say that it's more likely to happen than less likely to happen in our opinion."
BlackRock reported net income of $48 million in the second quarter, up 24% from the prior year. State Street Research's net income rose 220%, to $16 million.
BlackRock's solid earnings and stock price growth have led some analysts to suggest that it might want to separate itself from the less-than-stellar performance at PNC, a company that had run-ins with regulators last year.
But Claire Percarpio, an analyst at Janney Montgomery Scott, said the fact that BlackRock stock continues to trade well shows that its majority ownership by PNC "certainly hasn't hurt the momentum that the company has."
"I think BlackRock has such a great track record and the stock is clearly respected so much on its own," she said, "that I don't know that its [relationship with PNC] has been an important issue." She also said an incentive change to use BlackRock stock instead of PNC's was "really the critical change" for the unit.
Jason Goldberg, an analyst at Lehman Brothers, said the State Street deal's size would not be large enough to materially affect PNC's stake in BlackRock.
Mr. Cassidy said that PNC "has been very smart about BlackRock and leaving it alone."
MetLife has been divesting its asset management businesses in recent years.
It bought State Street Research in 1983. The company is unrelated to State Street Corp, the Boston banking company.
