PNC Financial (PNC) to Divest 22.4% Ownership in BlackRock

The PNC Financial Services Group, Inc. PNC announced plans to divest its 22.4% ownership interest in BlackRock, Inc. BLK through a secondary offering and related buyback by the asset manager.

PNC Financial made an investment in BlackRock in 1995. The stake was in the form of common stock and convertible participating preferred shares that shall convert to common stock upon selling.

The underwriters have an option to purchase an additional amount of BlackRock shares, exercisable within 30 days following the pricing of the offering. Notably, BlackRock has agreed to buy back $1.1 billion of its stock from PNC Financial, conditional on the completion of the offering.

Upon the successful completion of the offering and the underwriters fully exercise their option to purchase additional shares, the offering and repurchase will together result in the sale of PNC Financial's entire holding in BlackRock, excluding 500,000 BlackRock shares that PNC is retaining for a donation to the PNC Foundation by the end of June.

PNC Financial’s chairman, president and chief executive officer, William S. Demchak said, "We feel the time is now right to do just that, realizing a substantial return on our investment, significantly enhancing our already strong balance sheet and liquidity, and leaving PNC very well-positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets."

The divesture of a stake in BlackRock shall free PNC Financial from any regulatory obligations associated with the ownership of a large position in another diversified financial services company.

Our Take

PNC Financial has been benefiting from a strong capital position, improving revenues and strategic initiatives. However, significant exposure to commercial loans along with rising expenses is concerning.

Shares of PNC Financial have recorded a year-to-date fall of 36% compared with the 40.2% decline recorded by the industry.

Currently, the company carries a Zacks Rank #5 (Strong Sell).

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