PNC is selling its $17 billion stake in the world’s largest money manager, marking a 7,000% return on investment

FILE PHOTO: Blackrock’s Richard Prager rings the opening bell above the floor of the New York Stock Exchange in New York Reuters
  • PNC Financial Services announced its intent to sell its 22% stake in the world’s largest asset manager, BlackRock, on Monday.
  • PNC said the sale of its stake in BlackRock will allow PNC to be ready for potential investments or acquisitions that “history has shown can arise in disrupted markets.”
  • PNC acquired BlackRock for $US240 million in 1995, before spinning it off as an IPO in 1999, representing a return on investment of more than 7,000%.
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PNC Financial Services announced its intent to sell its 22% stake in BlackRock on Monday.

The Pittsburgh-based bank said the sale would allow the company to enhance its already strong balance sheet and be ready for a potential investment or acquisition that “history has shown can arise in disrupted markets.”

PNC has a history of buying rivals during periods of market distress.

PNC acquired National City for approximately $US5 billion amid the 2008 financial crisis.

Additionally, the sale of its stake will allow PNC to escape some financial regulations it was under because of its large ownership stake in the asset management company.

The sale of its stake in BlackRock will represent a massive return on investment for the bank.

PNC acquired BlackRock in 1995 for $US240 million from Blackstone.

Back then, BlackRock was a mortgage securities division with Blackstone that had about $US23 billion in assets. Today, BlackRock has $US6.5 trillion in assets under management as of March 31.

Blackstone CEO Stephen Schwarzman has since called the sale of BlackRock “a heroic mistake.”

PNC then spun off the company via an IPO in 1999, retaining some of its stake.

Not accounting for PNC’s previous reductions in its BlackRock stake (the 1999 IPO and a $US1.22 billion sale of BlackRock shares in 2010), and assuming the bank is able to sell its stake near the level BlackRock’s stock closed at on Monday, the return on PNC’s original investment would be more than 7,000%.

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PNC will exit its stake in BlackRock via a public secondary offering, and BlackRock will be buying back $US1.1 billion of its stock in the sale.

Shares of PNC were up nearly 5% in pre-market trading to $US106.89. Shares of BlackRock were down 3.5% in pre-market trading to $US475.90.