PNC bought into BlackRock for $240 million in 1995, and with its 22.4% ownership stake (34.8 million shares), it's the company's largest shareholder. With those shares now worth $17 billion, that means the bank has profited to the tune of about 70 times its initial investment, not including dividends.
"BlackRock's long track record of strong performance and growth has created significant value since PNC acquired our stake in the company. As good stewards of shareholder capital, we have consistently reviewed options to unlock the value of our investment," said PNC Chairman, President, and CEO William Demchak.
Demchak said the sale will enhance PNC's balance sheet and liquidity, and leave the bank positioned to "take advantage of potential investment opportunities that history has shown can arise in disrupted markets." Also, the divestiture will eliminate the regulatory obligations that come with owning a stake in another financial services company. The bank will sell all its shares except for 500,000 that will be donated to the PNC Foundation by the end of June.
PNC's shares are being sold in an underwritten public secondary offering. Immediately following the close of the secondary offering, BlackRock will repurchase $1.1 billion of its common stock from PNC equal to the net price per share that PNC receives in the secondary offering, which will occur simultaneously in the United States and internationally.
BlackRock's stock price dropped sharply on the news, falling 5% in early morning trading Tuesday to $467 per share. BlackRock is down 7% year to date. PNC's stock price was down about 3% Tuesday morning and is off 37% on the year.