BlackRock, Inc. (NYSE:BLK), Europe’s largest exchange-traded fund, or ETF, seller, will purchase Credit Suisse Group AG (NYSE:CS)’s ETF business for $200 to $300 million, according to Reuters. The publication cites an anonymous source who said the deal will close by the end of the second quarter.
BlackRock, Inc. (NYSE:BLK) is the largest investment manager in the world by assets, so by purchasing Credit Suisse Group AG (NYSE:CS)’s ETF business, it just increases its distribution and scale. Credit Suisse is Europe’s fourth largest ETF provider, holding about 5 percent of the market share there, according to London-based research firm ETF Global Insight. BlackRock, Inc. (NYSE:BLK) holds 42 percent of the market share, so the acquisition will give it almost half of the market share for ETFs in Europe.
Analysts who study the ETF market in Europe say it will likely grow significantly in the next few years as numerous financial advisors switch from a commission-based payment system to a fee-based one. Financial advisors who base their payments on fees rather than commission prefer to use ETFs because they provide an inexpensive way to get paid while maintaining more of their fees.
Reuters reports that two sources within the European ETF industry say BlackRock is probably paying a premium for Credit Suisse Group AG (NYSE:CS)’s ETF business because of the scale and distribution it gains from purchasing it. Analysts say scale is the key to any ETF business being successful.
Legal advisors for Credit Suisse reportedly do not believe there will be antitrust issues with regulators. Credit Suisse placed its ETF business on the auction black in July as part of its efforts to increase capital by selling assets.