Blackrock exercised its contractual rights to shut out the voting rights of Merrill Lynch, which is being acquired by Bank of America. Blackrock was apparently unhappy that John Thain, Merrill’s chief, was considering selling Merrill’s stake in BlackRock, talk of which led to a sharp drop in BlackRock’s share price.
BlackRock is altering the distribution of voting rights among its largest shareholders in a complicated arrangement that involves exchanges of common and preferred shares.
As a result of the adjustment, Merrill Lynch will still retain its 49.5 per cent stake in BlackRock but its voting rights will be slashed to 4.9 per cent. At the same time, PNC Financial Services will exercise 47 per cent of the voting rights, while retaining 33 per cent of the ownership.
The adjustment in the voting rights comes as a result of BlackRock’s right to reduce Merrill’s voting stake in the event of a change of control, a right that BlackRock demanded after its relationship with Merrill was extended for five years in July.