Blackrock Buying Shares, Is A Dividend Boost Evident For Bank Of America (NYSE:BAC)?

BlackRock Inc. (NYSE: BLK) has announced today it is buying the block of shares of BLK currently owned by Bank of America (NYSE: BAC). The repurchase of the 13.6 million series B convertible preferred shares will cost BlackRock approximately $2.55 billion. For BlackRock, the convertible shares held by Bank of America represent 7.1 percent of BlackRock value. The news release from company management notes the shares will be retired, resulting in an immediate boost to net income per share. The $187.65 per share purchase price is a 3.6 percent discount to the average BLK value over the last three weeks of trading. The share repurchase will be funded with a combination of short and long term debt. The shares were initially part of the BlackRock purchase of the asset management business of Merrill Lynch in 2006. When Bank of America acquired Merrill Lynch, the bank also acquired a one-third stake in BlackRock. The majority the shares obtained in the Merrill deal have been sold by Bank of America, leaving the 7.1 percent stake represented by the shares to be repurchased in this final deal, eliminating the entire BlackRock position held by Bank of America. Bank of America picks up the $2.55 billion to bolster the company's balance sheet and continue management's quest to increase the dividend. BAC is currently paying a token quarterly dividend of just one cent per share. In March, the Federal Reserve denied the bank's request to increase the dividend from the current level. Banks, including Bank of America, that borrowed TARP money during the financial crisis must seek approval from the Fed to increase the dividend payout. In the last quarterly earnings release, Bank of America management vowed to keep working towards a dividend increase. Competitors Wells Fargo and JP Morgan Chase have been approved for higher dividends. Another possible use for the cash is the illegal mortgage practices issue hanging over Bank of America's head. There are currently $13 billion in claims pending against the bank relating to fraudulent mortgage practices during the housing boom. This morning - the day of the repurchase announcement - BLK shares are trading up about 2.5 percent and BAC is flat. So far in 2011, the share value of BAC has declined by almost 20 percent. The BlackRock share price is up a couple of percent from where it started the year. Hopefully, Bank of America will be able to use the proceeds of the BlackRock share repurchase to obtain approval for a dividend increase and resulting stock share boost.  ... Read more