In a $12 billion all-equity deal, BlackRock (BLK, Financials) is going to buy HPS Investment Partners, a worldwide credit investment manager. BlackRock's purchase seeks to enhance its private credit products and link them with its $3 trillion public fixed-income platform, according to a statement.
BlackRock's private credit franchise would be expanded by the purchase to encompass around $220 billion in client assets, therefore expanding its private markets fee-paying assets under management by 40% and management fees by 35%, the firm said. Within BlackRock, HPS, which oversees $148 billion in client assets, will function as part of a recently established private finance solutions segment within BlackRock; HPS leadership will join BlackRock's Global Executive Committee.
As consideration, BlackRock will issue SubCo Units—exchangeable one-for-one into BlackRock ordinary stock. Of the 12.1 million SubCo Units, 9.2 million will be paid at closure; the rest will be postponed for five years dependent on reaching financial targets. HPS staff will be motivated with an equity retention pool of $675 million. As part of the deal, BlackRock will also restructure or retire $400 million of the HPS debt.
In the first full year after closing, the agreement is projected to marginally increase BlackRock's adjusted profits per share. Mid-2025 completion is expected, subject to usual closing conditions and regulatory clearances.
BlackRock projects that the private credit market will more than quadruple to reach $4.5 trillion by 2030, indicating is ready for expansion. The purchase fits BlackRock's larger plan to increase its products across sovereign wealth funds, pensions, and insurance as well as personal retirement investors.
With direct loans, private placements, and real estate debt among other assets, BlackRock's private debt company now oversees $90 billion. Including HPS's skills will help the business to provide corporate customers and alternative asset managers with end-to-end financing options, according to the asset manager.
