(Bloomberg) — BlackRock Inc . is close to a deal to acquire HPS Investment Partners, an acquisition that would propel the firm into the private credit tier as it seeks to become a major force in alternative assets.
A deal could be announced as early as this week and value HPS at $12 billion or more, according to people with knowledge of the matter, who asked not to be identified because the information is private. BlackRock will pay for HPS with a mix of cash and stock, they said.
The buyer could issue securities to help finance the cash component of the transaction, one of the people said. While the discussions are in the final stages, they could still be delayed or falter, the people said. The deal would leave BlackRock, which manages $11.5 trillion, with more than $500 billion in alternative assets.
Bloomberg News reported in October that BlackRock was interested in the acquisition of HPS and later that talks about an acquisition were advancing and both sides wanted a deal by the end of the year. The Financial Times reported in November that a transaction was close.
BlackRock Chief Executive Larry Fink has moved aggressively to expand into private markets, and the purchase of HPS would mean BlackRock has made its two largest-ever acquisitions of alternative asset managers in less than a year. BlackRock, already the largest manager of public equity and bond portfolios, is looking to replicate that scale in the private assets increasingly sought after by pensions, insurers, sovereign wealth funds and wealthy individuals.
Larry Fink, chairman and chief executive officer of BlackRock Inc., during an interview on Bloomberg Television in New York, U.S., Tuesday, March 26, 2024. Fink today said that the U.S. public debt situation “is more urgent than can ever remember”. and that the country should adopt policies to promote economic growth. Photo: Jeenah Moon/Bloomberg
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In October, the company completed a $12.5 billion acquisition of Global Infrastructure Partners, making BlackRock the second-largest manager of infrastructure assets with about $170 billion. It is already in the final stages of completing a £2.55 billion ($3.25 billion) deal for private markets data provider Preqin, which Fink has pledged to help the firm “index private markets” and lay the groundwork for linking exchange-traded funds with alternative assets.
HPS would turbocharge BlackRock's ability to compete in one of the hottest and most profitable areas of finance: private credit. HPS MANAGES $123 billion in private loans, making it one of the largest independent managers in that growing $1.6 trillion market. It oversees an additional $22 billion in public loans and has more than 760 employees.
Founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, the firm was bought by JPMorgan Chase & Co in 2016 in a deal that valued it at almost $1 billion. HPS had been pursuing a potential initial public offering that would have valued the firm at $10 billion or more, Bloomberg News reported in September.
With HPS, BlackRock's alternative investment business would be larger than Carlyle Group Inc.'s. and would begin to rival – at least in size – private equity leaders such as KKR & Co. and Apollo Global Management Inc. Blackstone Inc. largest, with about $1.1 trillion in assets at the end of the third quarter.
BlackRock's expansion into private markets would add significant revenue and earnings to the firm, as investors shifted aggressively over the past decade to low-cost index funds and ETFs and away from active mutual funds. higher fees.
A BlackRock representative declined to comment, while HPS spokespeople did not immediately respond to requests for comment.