(Bloomberg) — BlackRock Inc . agreed to buy HPS Investment Partners in an all-stock deal valued at about $12 billion, an acquisition that will propel the world's largest asset manager into the top tier of private credit.
HPS founders Scott Kapnick, Scot French and Michael Patterson will lead a new private finance solutions business unit with BlackRock, the asset manager said Tuesday in a statement.
“Together with the scale, capabilities and expertise of the HPS team, BlackRock will provide clients with solutions that seamlessly blend public and private,” BlackRock Chief Executive Larry Fink said in the statement.
The transaction is expected to close in the middle of next year, pending regulatory approval. That would leave BlackRock, which manages $11.5 trillion, with almost $600 billion in alternative assets. About a quarter of the deal will be paid out over five years, and additional BlackRock shares are possible based on performance. The deal also includes a $675 million severance package for HPS employees.
BlackRock said it expects to retire for cash, or refinance, about $400 million of HPS's existing debt.
The deal caps a year of efforts by Fink to transform the world's largest manager of public stocks and bonds into a formidable player in private assets coveted by pensions, insurers, sovereign wealth funds and wealthy individuals. With HPS and the earlier acquisition of Global Infrastructure Partners, BlackRock has made the two largest-ever acquisitions of alternative asset managers in less than a year.
In October, the company completed its $12.5 billion acquisition of GIP, making BlackRock one of the largest managers 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.
HPS MANAGES $148 billion in client assets, making it one of the largest independent managers in the growing private credit market. BlackRock expects the deal to increase its private markets fee-paying assets under management by 40%, and management fees by 35%.
Founded in 2007, 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 it at $10 billion or more, Bloomberg reported in September.
With HPS, BlackRock's alternative investment business will be larger than Carlyle Group Inc.'s. and will begin to rival – at least in size – private equity leaders such as KKR & Co. and Apollo Global Management Inc.
Blackstone Inc. it is significantly larger still, with about $1.1 trillion in assets at the end of the third quarter.
Perella Weinberg Partners and Morgan Stanley served as financial advisors to BlackRock, while JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Deutsche Bank AG, BNP Paribas SA and Royal Bank of Canada advised HPS.