PNC Financial Services Group announced late on Monday it intends to sell its 22.4% stake in BlackRock, the world’s largest asset manager.
BlackRock manages about $6.5 trillion in assets.
Pittsburgh-based PNC said it will sell its $17 billion stake “through a registered offering and related buyback” by BlackRock.
PNC CEO William Demchak said the sale would leave PNC “very well-positioned to take advantage of potential investment opportunities” that can arise in disrupted markets.
“PNC currently holds 34.8 million common and Series B preferred shares of BlackRock, representing 22.4% ownership,” said PNC.
“In connection with the offering, the underwriters will have an option to purchase up to an additional amount of BlackRock shares, exercisable within 30 days following the pricing of the offering.
“In addition, BlackRock has agreed to repurchase $1.1 billion of its stock from PNC conditional on completion of the offering.
“If the offering and repurchase are completed and the underwriters fully exercise their option to purchase additional shares, the offering and repurchase will together result in the sale of PNC’s entire holding in BlackRock, excluding 500,000 BlackRock shares that PNC is retaining for a donation to the PNC Foundation by the end of the second quarter of 2020.
“PNC originally purchased BlackRock in 1995 and the two companies have had a mutually beneficial relationship for more than 25 years.”
PNC CEO William Demchak said: “BlackRock’s long track record of strong performance and growth has created significant value since PNC acquired our stake in the company.
“As good stewards of shareholder capital, we have consistently reviewed options to unlock the value of our investment.
“We feel the time is now right to do just that, realizing a substantial return on our investment, significantly enhancing our already strong balance sheet and liquidity, and leaving PNC very well-positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets.”
In addition to the direct economic benefit of the sale, Demchak said the divestiture of PNC’s stake in BlackRock will eliminate any regulatory obligations associated with the ownership of a large position in another diversified financial services company.
Edward Jones analyst Kyle Sanders told Reuters that apart from the regulatory pressure, PNC may want additional liquidity to deal with the economic downturn caused by the coronavirus pandemic.
PNC may also be looking at acquiring another regional bank, he said.
“The sale of BlackRock shares likely signals that PNC is looking to make a sizeable deal during a period of market disruption, which is consistent which their actions in the past,” Sanders said.