June 9 (Bloomberg) -- BlackRock Inc. may buy Barclays Plc’s fund division for $12 billion to $13 billion in cash and stock in what would be the largest acquisition in the asset-management industry, a person with knowledge of the negotiations said.

BlackRock would pay half the purchase price in cash and the rest in stock, leaving London-based Barclays with a 20 percent stake in the combined company, said the person, who asked not to be identified because the information is private. New York-based BlackRock, which may announce the deal as soon as tomorrow, is seeking to raise as much as $3 billion from sovereign wealth funds in Kuwait and Qatar, the person said.

The Barclays Global Investors unit, which oversees $1.5 trillion, would be BlackRock’s biggest acquisition, building on its 2006 takeover of Merrill Lynch & Co.’s asset-management business for $8.5 billion. That purchase, the largest to date in the industry, pushed BlackRock deeper into actively managed stock funds. BGI would add index-based funds where rivals such as Pacific Investment Management Co. aren’t as competitive.

“With many large financial institutions under pressure to prepare for the next wave of writedowns by raising capital, we can expect to see more activity like this, though the size and significance of this particular deal, if completed, would be difficult to top,” said Kirby Daley, a Hong Kong-based senior strategist at Newedge Group.

Banks and other financial institutions have amassed more than $1.46 trillion of writedowns and property losses since the financial crisis started with the collapse of the U.S. subprime market in 2007. Barclays is trying to raise cash after reporting $18.6 billion of credit losses and shunning government funds that would have limited dividends and executive pay.

Stock Rises

Barclays spokesman Marc Hazelton and Bobbie Collins, a spokeswoman for BlackRock, both declined to comment. Terms of the deal were reported earlier by the Financial Times.

Barclays, the U.K.’s third-largest bank, confirmed in a statement yesterday that it’s in talks with BlackRock and others about the sale of BGI or its iShares unit. There’s no certainty any transaction will be completed, the bank said.

BlackRock rose $12.78, or 7.6 percent, to $182.14 at 4:15 p.m. in New York Stock Exchange composite trading, giving it a market capitalization of $23.7 billion. The stock has advanced 36 percent this year, compared with the 0.77 percent increase in the Russell 1000 Financial Services Index. Barclays rose 6.25 pence, or 2.2 percent, to 290 pence in London.

iShares Sale

A purchase of BGI, the world largest money manager, would give BlackRock, currently No. 3, about $2.81 trillion in assets and more customers outside the U.S. It would surpass State Street Corp., which managed $1.44 trillion as of Dec. 31, and Fidelity Investments, with $1.25 trillion. Both companies are based in Boston.

Barclays agreed in April to sell iShares, BGI’s exchange- traded fund business, to London-based CVC Capital Partners Ltd. for $4.4 billion. The bank has until June 18 to find a better deal for iShares, the world’s largest manager of exchange-traded funds, or all of San Francisco-based Barclays Global.

To contact the reporters on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net

Last Updated: June 9, 2009 16:17 EDT