The deal includes the purchase of Barclays ETF business iShares and would see the combined business increase its assets under management to £1.6trn.
In addition to the cash Barclays will receive 37.784m shares in the new company worth £4.2bn, valuing the deal at £8.2bn.
The new company will be called Blackrock Global Investors and will employ 9,000 in 24 different countries.
Barclays had previously agreed to sell the investment management division to another party but under the terms of the agreement it was allowed to shop around for another bidder. With the Blackrock offer now agreed by Barclays management the other party has five days to respond with a better offer or the Barclays board will put the Blackrock offer to shareholders.
If the deal is agreed BGI chief executive Blake Grossman will become vice chairman of the new business and Barclays group chief executive John Varley and chief group president and chief executive of investment management Bob Diamond will join the Blackrock board.
The tie-up would see BlackRock Global Investors become the world’s largest asset manager overtaking rival State Street Corporation.
Blackrock chairman and chief executive Laurence Fink says: “The combination of active and passive investment products will be unsurpassed, and will enhance our ability to offer comprehensive solutions and tailored portfolios to institutional and retail clients.”