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BlackRock (BLK) Mulling to Buy Credit Suisse's Fund Management Arm

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BlackRock, Inc. (BLK - Free Report) and the blank check firm of the ex-CEO of UniCredit, Jean-Pierre Mustier, are considering the possibility to acquire Credit Suisse Group’s (CS - Free Report) asset management unit, per an article by Reuters.

Credit Suisse might be interested in divesting the asset management unit, as its sale could presumably aid the bank to restore the capital cushion that took a major financial hit from the Greensill group and Archegos Capital Management crises.

Per the article, Credit Suisse is still in the early stages of reviewing its asset management arm and is yet to engage in detailed discussions with the interested parties. The Swiss bank will need to await the chairmanship of Antonio Horta-Osorio, former boss of Lloyds Banking Group PLC (LYG - Free Report) , after which any strategic decision of selling or spinning of the unit can be considered.

Credit Suisse’s fund management unit had reported an asset under management balance of CHF440 billion and a loss before tax of CHF39 million in the previous year. The business could be valued at $3.7-$4 billion for any potential deal. It is, however, expected to try to withhold a stake in any future deal or spin it off and list the same in Zurich, as per the article.

Nevertheless, any potential deal can be beneficial for both parties as it will help drive growth for the unit and also boost its scalability. Scale of the fund management business is becoming an integral factor for success in the growing margin industry. Deal volumes have hit a record high since the financial crisis and asset managers are rummaging for transformative deals.

Being the largest asset manager in the UnitedStates, BlackRock has expanded largely via acquisitions — both domestic and overseas. This February, the company acquired investment management services provider, Aperio Group. Also, the company has acquired several firms across the globe over the past few years, thus expanding its footprint and market share. With a robust liquidity position, the company is well positioned to grow further through opportunistic acquisitions in the days to come.

Asset managers have been in the spotlight, lately, as industry leaders are seeking global consolidation. U.S. investment firm, State Street Corp. (STT - Free Report) and Deutsche Bank AG’s (DB - Free Report) asset management arm, DWS Group, are also eyeing a competitive bid for all or part of the Credit Suisse’s fund management business.

Price Performance and Zacks Rank

Shares of the company have gained 27.9% in the past six months, while the industry has rallied 29.9%.

 

Currently, BlackRock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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