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BlackRock (BLK) Announces Formula One Purchase, Secondary Offering by Barclays

By: , dated May 23rd, 2012

Shares of international asset management giant BlackRock Inc. (BLK: Charts, News) closed down -4.36 or -2.60 percent on Tuesday to $163.37 per share; the stock later declined -3.52 or -2.15 percent in afterhours trading to $159.85 per share. BlackRock stock sold off during the day after news broke that BlackRock, along with two other partners had purchased a large stake in the Formula One Group motor-racing franchise.

BlackRock stock sold off in afterhours trading following news that Barclays Bank PLC (BCS: Charts, News) will be selling its 19.6 percent stake in BlackRock in an underwritten public offering for $160.00 per share. In addition, BlackRock will repurchase another $1.0 billion worth of its shares at a price of $156.80 per share.

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New York City based BlackRock Inc. is the largest asset management firm in the world, with over 10,000 employees worldwide and as of March of 2012, had $3.684 trillion in assets under management. The first news item, which affected BlackRock’s stock performance during the day, was the purchase of a stake in Formula One, a motor-racing franchise due to have its initial public stock offering in Singapore by late June.

The $1.6 billion stake in Formula One stock was purchased from privately held CVC Partners by BlackRock along with two partners, U.S. based investment group Waddell & Reed and Norwegian Norges Bank Investment Management, the asset management unit of the Norwegian central bank. The stake represents 21 percent of Formula One and gives the company a valuation of $7.6 billion.

BlackRock stock then fell below $160.00 per share in afterhours trading after Barclays Bank PLC announced it had agreed to sell 26,211,335 shares at that price in an underwritten public offering. Also, BlackRock will buy back 6,377,552 shares from Barclays at $156.80 per share.

The underwriters of the offering were also granted an option to buy up to 2,621,134 more BlackRock shares at the offering price which could be exercised within 30 days. The secondary offering, along with the BlackRock repurchase and the underwriter’s optioned shares represents Barclays’ entire stake in BlackRock.

Barclays received the stock as part of BlackRock’s 2009 purchase of Barclays Global Investors division for $15 billion. The value of Barclays’ investment in BlackRock was written down to 3.4 billion in 2011, with the deal’s net proceeds, Barclays expects to receive $5.5 billion or 3.49 billion at the current rate of exchange.

The two news items have already brought BlackRock stock down more than four percent since Monday. With the secondary offering and large investment in Formula One at least a month away from its IPO, the stock may continue to slide near term.

Barclays offering will certainly put a $160 top on the stock at least until after the deal goes through. As far as the Formula One investment, after Facebook’s (FB: Charts, News) shares more than -25 percent slide in the first two days after its IPO, demand for Formula One shares may not be as high as previously anticipated, putting additional pressure on BlackRock.

Other News About BLK
BlackRock’s Landers Waits On Brazil Petrobras, But Vale Is A Fave
BlackRock invests heavily in Brazil.
BlackRock, Others Invest $1.6 Billion In Formula One Ahead Of IPO
Formula One investment article. Other Stocks in the News
Morgan Stanley cut Facebook estimates just before IPO
Morgan Stanley unexpectedly reduced revenue forecasts for Facebook before the offering.
SAP to Acquire Ariba for $4.3 Billion in Push Into Cloud
German based SAP will purchase Ariba for $45 per share.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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