BlackRock announced that it was buying back all of its shares owned by Bank of America, closing out an ownership relationship that helped BlackRock grow into the world's biggest asset manager.

BlackRock will pay $187.65 per share, or $2.54 billion, for the 13.6 million Series B convertible preferred shares owned by Bank of America. The bank is getting a sweeter payday than when it sold an initial block of its BlackRock shares on the public market in November for $163 each.

By buying back the huge block of shares that Bank of America held on its balance sheet, the deal allows BlackRock to reduce its total share count without reducing its public float. BlackRock, which went public in 1999, was just added to the Standard & Poor's 500 Index in April after its public float finally exceeded the required 50 percent threshold. The deal will likely increase BlackRock's earnings per share by about 3 percent.

For Bank of America, the deal raises cash that can be put to work expanding other businesses and avoids hefty capital charges the bank would have been required to set aside against the BlackRock position under the new Basel III rules.

The announcement comes just six months after the bank announced it would slash its ownership in the asset manager by selling a large portion of its BlackRock stake on the open market.

Bank of America acquired the shares when it bought Merrill Lynch in 2008 amid the depths of the financial crisis. Merrill got the shares in 2006 when it swapped its entire fund business to BlackRock for a 49.8 percent stake valued at the time at $9.4 billion.

The deal does not sever all ties between the companies. Tom Montag, who heads Bank of America's Global Banking and Markets Group, will remain a member of BlackRock's board of directors. [Reuters 5/19/11]