Bankers Reap Fees as PNC Sells $14 Billion BlackRock Stake

(Bloomberg) -- Equity capital markets bankers who won roles on PNC Financial Services Group Inc.’s massive share sale are set to make up some of the revenue they’ve lost out on this year from scrapped initial public offerings.

PNC is set to raise roughly $14 billion after selling as much as 34.4 million shares in BlackRock Inc., according to a statement on Tuesday, confirming an earlier Bloomberg News report. PNC priced 28.8 million shares of the asset manager at $420 apiece in the offering, while BlackRock also agreed to buy about 2.7 million shares from PNC for $414.96 each, the statement said. Underwriters have an option to purchase up to 2.88 million additional BlackRock shares from PNC in the next 30 days.

The sale prices represent a discount ranging from 7.6% to 8.7% from BlackRock’s closing price of $454.44 on Tuesday. PNC will exit its entire 22% holdings in BlackRock if the underwriters fully exercise the option to buy additional shares. Shares of BlackRock were down 1.9% in post-market trading.

The deal will be a $140 million fee bonanza for its bankers that are hungry for deals after anticipated listings in the pipeline like Airbnb Inc. dried up. That is about 1% of the deal size.

At $14 billion, the BlackRock stake sale is the largest equity offering in the U.S. since Alibaba Group Holding Ltd.’s $25 billion IPO in 2014, according to data compiled by Bloomberg. The Chinese e-commerce giant set aside about $260 million in fees for advisers at the time, the data shows.

Morgan Stanley, Citigroup Inc. and Evercore Inc., the lead underwriters for PNC, are expected to split over half of the fee pool, people with knowledge of the matter have said, asking for anonymity discussing private matters. Bank of America Corp., JPMorgan Chase & Co., Barclays Plc and Credit Suisse Group AG have also been added to the deal in a more junior capacity, the people said.

A filing is expected later this week detailing the fees and all the banks that received roles on the deal, the people added.

A representative for PNC declined to comment, while a representative for Evercore couldn’t immediately be reached for comment. Representatives for Citi, Morgan Stanley, Bank of America, Barclays, JPMorgan and Credit Suisse declined to comment on the fee and their involvement.

Sellers of marketed follow-on offerings, such as the BlackRock share sale, usually set aside about 1% to 2% of the deal for advisers’ fee. These deals complete more quickly than IPOs but the investment banks risk not being able to sell the whole trade.

To be sure, IPO fees are still more lucrative. Companies usually set aside 5% to 7% of the size of the offering for its advisers.

Fundraising volume for U.S. IPOs dropped 32% on a year-over-year basis. Companies including trusts and special purpose acquisition vehicles have raised a combined $18.4 billion this year versus $27.3 billion from the same period last year.

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