BLACKROCK is nearing a deal to buy HPS Investment Partners, a purchase that would vault the firm into the top ranks of private credit as it seeks to become a major force in alternative assets.
An agreement could be announced as early as the coming week and value HPS at US$12 billion or more, according to sources with knowledge of the matter. BlackRock will pay for HPS with a mix of cash and stock, they said.
Bloomberg News reported in October that BlackRock was interested in acquiring HPS and later that talks about a purchase were advancing and both sides were seeking a deal by the end of the year. The Financial Times reported in November that a transaction was close. The deal would leave BlackRock, which manages US$11.5 trillion, with more than US$500 billion of alternative assets.
While discussions are in the final stages, they could still be delayed or falter, the sources said, asking not to be identified because the information is private. A representative for BlackRock declined to comment, while spokespeople for HPS did not immediately respond to requests for comment.
BlackRock chief executive officer Larry Fink has moved aggressively to expand in private markets, and buying HPS would mean BlackRock has clinched the two largest-ever acquisitions of alternative asset managers in less than a year. BlackRock, already the biggest manager of public equity and bond portfolios, is seeking to replicate that scale in the private assets increasingly sought by pensions, insurers, sovereign wealth funds and rich individuals.
In October, the company completed a US$12.5 billion acquisition of Global Infrastructure Partners, making BlackRock the second-largest manager of infrastructure assets with about US$170 billion. It’s already in the final stages of completing a £2.6 billion (S$4.4 billion) deal for private-markets data provider Preqin, which Fink has vowed will help the firm “index the private markets” and lay the groundwork to tie exchange-traded funds (ETFs) to alternative assets.
HPS would turbocharge BlackRock’s ability to compete in one of finance’s hottest and most lucrative areas: private credit. HPS manages US$123 billion in private credit, making it one of the largest independent managers in that surging US$1.6 trillion market. It oversees an additional US$22 billion in public credit and has more than 760 employees. Founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, the firm bought itself out of JPMorgan in 2016 in a deal that valued it at almost US$1 billion.
With HPS, BlackRock’s alternative investment business would be larger than that of Carlyle Group and begin to rival – at least in size – private-asset leaders such as KKR and Apollo Global Management. Blackstone is still considerably larger, with about US$1.1 trillion of assets at the end of the third quarter.
BlackRock’s expansion into private markets would add considerable revenue and profit to the firm, as investors shifted aggressively over the past decade to low-cost index funds and ETFs and away from higher-fee active mutual funds. BLOOMBERG
