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BlackRock (BLK) Plans to Acquire eFront for $1.3B in Cash

Zacks Equity Research

BlackRock, Inc. BLK has made a binding offer and entered an exclusive agreement to acquire eFront from eFront’s employees and Bridgepoint. The cash transaction, valued at $1.3 billion, is expected to be minimally dilutive to BlackRock’s earnings per share (EPS).

BlackRock plans to fund the transaction, using existing corporate liquidity and debt. Following the news, shares of the company declined nearly 3%, along with the broader market decline.

Per the exclusive agreement, BlackRock and shareholders of eFront will enter into a definitive securities sale agreement, following the completion of the notification and consultation process with eFront’s employees, as required by law. In fact, the completion of the deal is subject to entry into the definitive agreement and satisfaction of conditions set forth therein.

Being a leader in providing end-to-end alternative investment management software and solutions, eFront serves more than 700 clients in 48 countries. BlackRock plans on combining this with its investment operating platform, Aladdin.

Commenting on the deal, BlackRock’s chairman and CEO, Laurence D. Fink informed, “Technology and illiquid alternatives are two pillars of BlackRock’s growth, and this transaction provides a unique opportunity to accelerate our positioning in both.”

Given eFront’s global footprint, it is expected to help BlackRock expand its presence across the globe.

Additionally, BlackRock’s chief operating officer, Rob Goldstein stated, “eFront vastly expands Aladdin’s alternatives capabilities and further distinguishes it as the most comprehensive investment operating platform in the world. Offering eFront’s leading capabilities in alternatives to the Aladdin Community through BlackRock Solutions will allow our clients to access a ‘whole portfolio’ approach that only Aladdin will provide. We are excited to welcome eFront’s 700 employees to BlackRock as we continue to offer eFront as its own platform and enrich its value proposition with Aladdin analytics.”

Notably, BlackRock’s strong global presence, broad product diversification, revenue mix and steadily improving assets under management are expected to boost revenues. With strong liquidity position, the company remains well positioned to grow through acquisitions.

Shares of BlackRock have lost 22.8% over the past year compared with 17.9% decline of the industry.

Currently, the stock carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the finance space are Fifth Third Bancorp FITB, M&T Bank Corporation MTB and Credit Acceptance Corporation CACC.

Over the past 60 days, Fifth Third Bancorp has witnessed a marginal upward earnings estimate revision for the current year. Its shares have gained 4.6% in the past three months. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Currently, M&T Bank also has a Zacks Rank of 2. Its earnings estimates for 2019 have remained unchanged over the past 60 days. Shares of the company have gained 9% in the past three months.

Credit Acceptance’s share price has increased nearly 14.7% in the past three months. For 2019, its earnings estimates have been revised 10.2% upward over the past 60 days. The stock currently sports a Zacks Rank #1.

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