Merrill shares up on new BlackRock agreement

There had been concerns that Merrill Chief Executive John Thain would sell all or part of the stake to raise more capital. The company, like others, has been hurt by some $40 billion of write-downs during the past year.

Instead of selling BlackRock, Thain said last week that both would forge even deeper ties. The amended agreement announced in a regulatory filing on Tuesday would give BlackRock certain guarantees should Merrill decide to sell all or part of its global private client business.

Merrill sells BlackRock products through that business. If a change of control of the private client business takes place, the distribution agreement would be extended by five years, according to the filing with the Securities and Exchange Commission.

The new agreement basically gives Merrill the flexibility needed to pursue ways to raise capital and help the company grow without hurting its partnership with BlackRock, analysts said.

"This gives Merrill time to review and explore all crisis management options as balance sheet cleansing continues while also and importantly, carefully lay out the road map for the future of the firm and its ultimate mix of businesses," Keefe Bruyette & Woods analyst Lauren Smith said in a note to clients.

Shares of Merrill fell 37 cents, or 1.1 percent, to $33.81, while BlackRock rose $1.65 to $222.57.