NEW YORK -- The retail brokerage giant Merrill Lynch & Co. is in talks to trade its asset-management business for a large stake in money manager BlackRock Inc., according to reports published yesterday.
The deal would transform BlackRock into one of Wall Street's top money managers, with an asset base of around $1 trillion, according to The Wall Street Journal and The New York Times. Both papers said the deal could be completed this week, citing unnamed sources.
The Journal said the deal would give Merrill a 49 percent stake in BlackRock, whose market capitalization was $8.4 billion on Friday. But it warned that although an announcement could come today or tomorrow, it is possible the deal may not be completed.
BlackRock and Merrill Lynch did not return calls seeking comment.
News of the discussions comes just weeks after rival Wall Street investment bank Morgan Stanley ended widely reported discussions for obtaining a stake in BlackRock and as more top-tier Wall Street firms look to smaller, more specialized competitors for alliances or acquisitions.
''Deals like this allow both sides to focus on their core strengths, while having a more diversified presence through each other's products and offerings," said David Haas, an industry analyst at Fox-Pitt Kelton.
In December, Citigroup closed its acquisition of Legg Mason's broker-dealer unit, for which it gave up its asset management business. The deal played to both companies' strengths, while helping Citigroup avoid potential conflicts by broker-dealers recommending asset management products, or vice versa.
Additionally, with increased regulatory scrutiny of asset management and their fees declining, the many asset management companies that popped up in the 1990s are finding themselves with shrinking margins.
''I think this is definitely an industry ripe for consolidation," said Richard Bove, an analyst with Punk, Ziegel & Co. ''You have to assume that there are a lot of companies out there facing difficult times and wanting to merge."
BlackRock's strength in fixed-income asset management dovetails with Merrill Lynch's traditional focus on equities in its asset management strategies, Haas said. In addition, an alliance with Merrill would substantially increase BlackRock's reach in international markets.
Shares of BlackRock have soared in recent months and jumped another $10.48, or 8 percent, to $141.99 yesterday, above the high end of the stock's previous 52-week range of $69.38 to $138. Shares of Merrill Lynch rose $1.04 to $73.83.