Bank of America Will Sell BlackRock Stake Back to Company for $2.5 Billion

Bank of America Corp. (BAC), the largest U.S. lender by assets, agreed to sell its remaining stake in BlackRock Inc. (BLK) back to the world’s biggest money manager for about $2.5 billion.

The bank will sell 13.6 million shares to New York-based BlackRock for $187.65 apiece, 3.6 percent less than the average closing price for the preceding 15 days, BlackRock said today in a statement. Bank of America acquired a 34 percent stake in BlackRock when it took over Merrill Lynch & Co. in 2009 and has been gradually reducing its holdings.

The proceeds may help Bank of America resolve mounting claims from mortgage buyers, insurers and regulators tied to defective home loans. Chief Executive Officer Brian T. Moynihan told investors this month his bank still “struggles mightily” with fallout from the 2008 purchase of mortgage lender Countrywide Financial Corp. Refunds and legal settlements dragged down first-quarter profit 36 percent to $2.05 billion.

“This is cash coming in, which is a positive event, as opposed to all the other remaining tasks” Moynihan has related to resolving mortgage liabilities, said Jonathan Hatcher, a credit strategist at Jefferies & Co. in New York. “It’s nice to get $2.5 billion, but that’s probably a drop in the bucket relative to everything else they have going on.”

Bank of America slipped 8 cents to $11.71 at 2:18 p.m. in New York Stock Exchange composite trading. BlackRock added $5.06, or 2.6 percent, to $198.31.

Unwinding the Stake

The deal dissolves the last of what once had been a 49.8 percent stake in BlackRock acquired by Merrill Lynch in September 2006, in exchange for the brokerage’s fund-management unit. The transaction announced today would complete Bank of America’s exit from what the firm considered a “non-core asset,” said Jerry Dubrowski, a spokesman for the Charlotte, North Carolina-based lender. In November, the company raised $8.3 billion by selling 51.2 million BlackRock shares.

“There is a long history of collaboration between Bank of America Merrill Lynch and BlackRock that focuses on providing exceptional investment solutions for our respective clients,” Moynihan said in the statement. The transaction “will have no effect on our commitment to continuing this very successful partnership.”

The transaction will be completed about June 1, BlackRock said. The stock will be retired, which will immediately boost BlackRock’s earning per share, the statement said.

Competitors Pass Review

Bank of America was left behind as competitors including JPMorgan Chase & Co. and Wells Fargo & Co. passed a Federal Reserve review of their capital plans and then increased their dividends. The lender will resubmit its plan to raise its 1-cent a share payout when management is sure regulators will accept it, Moynihan told investors this month at the annual shareholder meeting.

Thomas K. Montag, head of Bank of America’s global banking and markets division, will remain on BlackRock’s board, the firm said. Montag replaced Sallie Krawcheck, president of Bank of America’s wealth management division, on BlackRock’s board this year.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net. Rick Green in New York at rgreen18@bloomberg.net.

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