(Bloomberg) — BlackRock Inc . is in advanced talks to buy HPS Investment Partners, emerging as the only suitor in active talks with the firm as the world's largest asset manager seeks to compete in the fast-growing private lending industry.
Both sides are looking to reach an agreement by the end of this year, according to people with knowledge of the discussions, who requested anonymity to discuss confidential matters. HPS could still opt for an initial public offering or minority stake sale if the parties fail to agree on a valuation, some of the people said.
Read more: BlackRock is said to be among the suitors for credit firm HPS
A deal would leave BlackRock, which managed $11.5 trillion at the end of the third quarter, with more than $500 billion in alternative assets. HPS would aim for a post-IPO valuation of $11 billion and for a sale would demand a premium to that, the people said.
Analysts at Wells Fargo & Co. led by Michael Brown said in an Oct. 29 note that HPS could fetch about $12 billion in a potential acquisition by BlackRock.
While negotiations are progressing, an agreement has yet to be reached and the talks could end without a deal, some of the people said. BlackRock declined to comment. HPS did not respond to a request for comment.
Chief Executive Larry Fink has moved aggressively to expand his firm's footprint in private markets, and the purchase of HPS would mean BlackRock has made its two largest-ever acquisitions of alternative asset managers in the space of roughly 10 months. BlackRock is looking to replicate its dominant scale in the equity and bond markets in private assets, which are increasingly sought after by pensions, insurers, sovereign wealth funds and wealthy retail clients.
A few weeks ago, the company completed a $12.5 billion acquisition of Global Infrastructure Partners, making BlackRock the second-largest manager of infrastructure assets. It is already in the final stages of closing a £2.55 billion ($3.3 billion) deal for private markets data provider Preqin Ltd., which Fink has said will help the company “indexing private markets” and lay the groundwork for ETFs to be linked to alternative assets.
HPS manages more than $100 billion, making it one of the largest independent growth managers private credit market. That is pegged at $1.7 trillion, but proponents say the market includes a wider range of assets and could grow to between $20 trillion and $40 trillion.
Founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, the firm was bought by JPMorgan Chase & Co in 2016, a complicated deal that valued it at roughly $1 billion.