BlackRock has agreed to buy Barclays Global Investors (BGI) in a deal involving £8.2 billion cash and shares, it has been announced.

The deal was announced late on Thursday and will see Barclays take a 19.9 per cent stake in the enlarged firm BlackRock Group Investors and £4 billion in cash, which the bank will use to shore up its balance sheets.

Barclays had already agreed to sell part of the unit, iShares, to CVC Capital Partners, and CVC has until Thursday June 18th to make an improved offer.

As part of the deal, Barclays chief executive John Varley and group president Robert Diamond will sit on BlackRock’s board of directors. Both executives will receive sizeable windfalls from the sale.

Mr Diamond, who will take £16 million from the deal, said: “The benefits of convergence could be accessed through a strong partnership rather than full ownership; our stake in one of the newest industry leaders would enable us to derive new opportunities in both Barclays Capital and Barclays Wealth.

“Our clients and our shareholders would benefit from the enhanced capability this proposed transaction would deliver.”

Barclays has refused taxpayer cash following the banking crisis and looked for other ways to repair its balance sheets.

The deal with BlackRock will help take the bank’s Core Tier 1 ratio to eight per cent.

Barclays has already announced it has passed the Financial Services Authority (FSA) stress tests for banks.