BlackRock will pay $187.65 per share, or $2.54 billion, to purchase the 13.6 million series B convertible preferred shares that Bank of America owns.
This deal comes just six months after the two companies announced plans for the bank to dramatically scale back its ownership in the asset manager by selling a large portion of the shares it owned in early November.
BlackRock, which oversees $3.6 trillion in assets, saw its share price close trading at $193.25 on Wednesday.
The New York-based asset manager, which has long been trusted to manage money for central banks and governments, will use available cash and $2 billion of commercial paper, medium-term and along-term debt to pay for the shares the bank now holds.
This stock repurchase and our recent dividend increase (are) evidence (of) our continued commitment to enhancing shareholder value through effective use of our significant free cash flow, while maintaining our strong liquidity and capital position, BlackRock Chairman and CEO Laurence Fink said in a statement.
Our decision to monetize our stake in BlackRock will have no effect on our commitment to continuing this very successful partnership, he said.
The deal does not sever all ties between the companies however, Fink said, noting that Tom Montag, who heads Bank of America's Global Banking and Markets Group will stay on BlackRock's board.
(Reporting by Svea Herbst-Bayliss, editing by Maureen Bavdek)