* Credit Suisse ETF arm manages 16 bln Swiss francs
* Sources put price tag at $200-300 million
* Deal to close by end of Q2
* BlackRock is largest ETF seller in Europe
ZURICH, Jan 10 BlackRock is to buy
Credit Suisse's exchange-traded fund (ETF) business,
which will give the U.S. asset manager greater scale in Europe.
The price tag on the deal, announced on Thursday, was not
disclosed, but two sources familiar with the matter put it at
between $200 million and $300 million.
For Credit Suisse, the disposal marks another step to
bolster capital in line with tough new requirements on banks
after the financial crisis.
BlackRock, the world's biggest investment manager by assets,
will increase its scale and distribution with this deal.
Credit Suisse is the fourth largest ETF provider in Europe,
with 58 ETFs and a 5.3 percent market share as of Dec. 31,
according to ETF Global Insight, a London-based ETF research
BlackRock is the largest ETF provider in Europe, with more
than 42 percent of the $331 billion European ETF market. Its 202
European iShares ETFs had $139.6 billion in assets as of Dec.
31, the research firm said. With the acquisition, BlackRock will
have more than a 47 percent market share of the European ETF
market, according to ETFGI.
Exchange-traded funds are baskets of securities, like mutual
funds. But ETFs trade on exchanges, like individual securities,
and carry lower fees than mutual funds.
Scale is key in ETFs. "The ETF business is generally a
low-margin business which needs scale to make it attractive,"
said Bank Vontobel analyst Teresa Nielsen.
"The acquisition ... represents BlackRock's continued
commitment to the Swiss market and underpins the importance we
place on meeting the needs of our clients," chairman and chief
executive Laurence Fink said.
The European ETF market is expected to grow substantially in
coming years as more financial advisers move from charging
commissions toward fee-based businesses, said Deborah Fuhr,
founding partner of ETFGI.
Fee-based advisers like using ETFs because they are low cost
and allow the advisers to maintain a bigger portion of their
"The European ETF market is about five or so years behind
the U.S. market," she said.
Given the importance of scale in the ETF business, it is
likely that there will be more consolidation of ETF providers in
coming months, said Luke Montgomery, an analyst at Bernstein
"It seems to be headed toward more consolidation given that
so many players only have about 5 percent of the assets under
management," he said.
Two ETF industry sources said BlackRock was likely paying a
premium for the scale and distribution that it would gain from
the Credit Suisse business, which they valued at between 150 and
200 million Swiss francs ($162 million - $216 million).
"Anyone not in the top three in Europe would be willing to
sell their ETF business at the right price," said one ETF
A source familiar with the situation said that CS's legal
advisers do not expect significant antitrust issues.
Credit Suisse put the ETF business, which manages 16 billion
Swiss francs in client funds, on the block in July as part of a
plan to bolster capital by 15.3 billion francs. This included
issuing convertible bonds and selling prime Zurich real estate
and other assets.
In November, Credit Suisse said it was integrating its
private banking and asset management divisions into a new wealth
management unit to cut costs.
Credit Suisse said the effect of these measures to bolster
capital will be detailed in its four quarter earnings on Feb. 7.
Credit Suisse's ETF business is the second international ETF
business BlackRock has acquired in the past year after it bought
Toronto-based Claymore Investments, a Canadian ETF operation,
from Guggenheim Partners LLC, in March.
Credit Suisse and BlackRock said they expected the deal to
close by the end of June.