Although some criticized BlackRock's
acquisition of State Street Research & Management
as nothing more than an asset grab, executives made the case that the deal is much more than that in a conference call last week.
As part of the deal, BlackRock and SSRM parent MetLife
have agreed to enter into a "cooperation agreement." Executives danced around the specifics, but indicated that the arrangement means expanded distribution for BlackRock's products.
"This will give us more scale, more products to really build…a larger distribution channel in the open-end fund area, and gives us more name recognition with a greater scale," said BlackRock's Chief Executive Officer, Laurence Fink
Although Fink emphasized the "continuity of service" aspect of the arrangement for SSRM's fund shareholders, Fink said that in the future, the companies would expand distribution of SSRM and potentially BlackRock products through MetLife's retail channel, which include their agents selling mutual funds directly, and through other products such as variable annuities.
The partnership will extend to the institutional side, as well. BlackRock will leverage MetLife's expertise working with pension plans managers and corporations to wrap asset management into products.
On the retail side, BlackRock will consolidate the mutual fund families, pending shareholder approval, under the BlackRock brand. For the SSRM-branded funds, BlackRock will use retain the names, but within the BlackRock brand.
BlackRock will also add at least 12 wholesalers to its currently 28-person staff.
But even $10 billion in additional SSRM mutual fund assets will keep BlackRock competitive as a fund platform, said Fink.
"It is my opinion small mutual fund platforms will not be able to…afford margins that are competitive because the added regulatory and accounting and compliance supervision issues," commented Fink. Although the combined BlackRock-SSRM mutual fund assets will total $26 billion, making the family the seventeenth largest broker-directed fund platform, Fink said that a $26 billion fund complex does not have the scale necessary to compete.
But do not expect additional acquisitions in the immediate future. BlackRock, before considering future targets, has to complete the SSRM transaction successfully, said Fink.
That means that BlackRock is unlikely to acquire another fund manager before it completes full integration -- expected by early 2005.
, president of BlackRock, and Dick Davis
, chief executive officer of SSRM, will lead the efforts to integrate the firms. BlackRock plans to maintain "significant presence" in Boston, San Francisco, and Morristown, New Jersey
-- cities in which SSRM currently has offices.
Fred Lieblich, head of SSR Realty Advisors, will maintain his position as head of that unit.
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