BlackRock to Acquire ETF Business - Analyst Blog
January 10 2013 - 9:10AM
Zacks
According to Reuters, BlackRock Inc.
(BLK) is set to acquire Credit Suisse Group’s (CS)
European exchange-traded fund (ETF) business. However, there is no
official word from any of the parties involved in the deal.
The terms of the deal are also not known, as it has not been made
public yet. BlackRock and State Street Global Advisors – asset
management wing of State Street Corporation (STT)
– were the leading contenders for Credit Suisse’s European ETF
operations when the company put it up for sale in October last
year. However, State Street pulled out of the bidding in
December.
The acquisition is likely to give BlackRock a competitive advantage
in the European ETF market. Currently, BlackRock is one of the
largest players in the European ETF space with almost 42% (worth
nearly $331 billion) of the market share. As per ETFGI – a
London-based research firm – the buyout may provide BlackRock the
control of nearly 75% of the European ETF market, thereby making it
the dominant player in that sector.
The ETF market has witnessed unprecedented growth in the last
couple of years. With interest rates showing no signs of
improvement, investors are looking for alternative areas of
investment. This has given the ETF market a major boost as it helps
the investors diversify their investments, achieve good benchmark
returns and provides access to multiple assets and real-time asset
allocation at a low cost.
The rapid growth of ETF markets has attracted a lot of attention
from both investors and financial institutions. BlackRock – one of
the largest asset management companies – has not remained
indifferent to this growth story. It has used the opportunities to
propel itself amongst the leaders in this arena.
BlackRock is constantly looking for opportunities that will further
evolve its lucrative ETF business. Besides the abovementioned deal,
the company bought Toronto-based Claymore Investments, a Canadian
ETF operation, from Guggenheim Partners LLC in March 2012. All
these endeavors are expected to prove beneficial to BlackRock’s
top-line growth in the future.
BlackRock is expected to announce its fourth quarter 2012 results
on January 17, 2013. The earnings ESP (expected surprise
prediction) – the percentage difference between the Most accurate
Estimate and the Zacks Consensus Estimate – is 0.81% for the
company. This along with its Zacks Rank #2 (Buy) makes us sure that
the company will outpace the Zacks Consensus Estimate.
Presently, we maintain a long-term Neutral recommendation on the
stock.
BLACKROCK INC (BLK): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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