In a landmark move set to reshape the landscape of private credit, BlackRock, Inc. (NYSE: BLK), the world’s largest asset manager, has announced a definitive agreement to acquire Hps Investment Partners, a premier global credit investment firm managing approximately $148 billion in client assets. The acquisition, valued at around $12 billion, will be entirely settled in BlackRock equity, signaling a strong commitment to the burgeoning private credit market and a strategic expansion of BlackRock’s alternative investment capabilities.
This acquisition unites BlackRock’s extensive network of corporate and asset owner relationships with HPS Investment Partners‘ robust origination capabilities and flexible capital deployment. The newly formed private credit powerhouse will operate in close synergy with BlackRock’s existing $3 trillion public fixed income business, creating a comprehensive suite of public and private income solutions tailored to meet the diverse needs of clients across their investment portfolios.
“I am thrilled about the potential of HPS Investment Partners and BlackRock coming together to deliver even greater value to our clients,” stated Laurence D. Fink, BlackRock Chairman and CEO. “Welcoming Scott Kapnick, Scot French, and Michael Patterson, along with the entire HPS Investment Partners team, to BlackRock marks an exciting new chapter. We are proactively positioning ourselves to anticipate and address our clients’ evolving needs. By integrating the scale, resources, and deep expertise of HPS Investment Partners, BlackRock is poised to offer clients unparalleled solutions that seamlessly navigate both public and private markets.”
This strategic acquisition underscores the increasing importance of private capital in fueling global growth. As the demand for debt financing rises, private credit emerges as a critical solution, and BlackRock’s incorporation of HPS Investment Partners positions it to effectively connect businesses of all sizes with vital financing. From supporting small and medium-sized enterprises to large corporations, this partnership will facilitate investments that drive economic expansion and generate employment opportunities.
The structural shift towards private credit is further propelled by market dynamics, technological advancements, and evolving regulatory frameworks, all converging to enhance efficiency in financial activities. BlackRock anticipates the private debt market to more than double, reaching an estimated $4.5 trillion by 2030. The inherent characteristics of private credit, including duration, attractive returns, and yield potential, align perfectly with the investment objectives of clients with long-term capital horizons, such as insurance companies, pension funds, sovereign wealth funds, wealth managers, and individuals saving for retirement.
Following the acquisition, BlackRock and HPS Investment Partners will establish a new private financing solutions business unit. This integrated platform will be spearheaded by Scott Kapnick, Scot French, and Michael Patterson, leveraging their extensive expertise to offer a broad spectrum of capabilities across senior and junior credit solutions, asset-based finance, real estate, private placements, and CLOs. To create a comprehensive financing ecosystem for alternative asset managers, the unit will integrate direct lending, fund finance, and BlackRock’s existing GP and LP solutions, encompassing fund of funds, GP/LP secondaries, and co-investments. This synergy will deliver a seamless, integrated solution for both clients and borrowers across the credit spectrum, spanning corporate and asset-based finance, investment and non-investment grade opportunities, and private credit strategies. As part of this transformative transaction, Scott Kapnick, Scot French, and Michael Patterson will join BlackRock’s Global Executive Committee, and Mr. Kapnick will serve as an observer on the BlackRock Board of Directors, further integrating HPS Investment Partners‘ leadership into BlackRock’s strategic direction.
“Today represents a pivotal moment in our ambition to become the world’s leading provider of private financing solutions,” commented Scott Kapnick, CEO of HPS Investment Partners. “Our alliance with BlackRock will significantly amplify our standing in this rapidly expanding and increasingly competitive market. The fusion of HPS Investment Partners‘ established culture of disciplined investment with BlackRock’s global reach will unlock unprecedented opportunities for our investors and employees, paving the way for sustained success in the years ahead. My partners and I are enthusiastic about collaborating with Larry Fink and our new colleagues at BlackRock.”
Founded in 2007, HPS Investment Partners has risen to prominence as a leading global credit investment manager, known for its capabilities across the entire capital structure. The firm’s consistent track record of identifying, structuring, and executing compelling investments, coupled with its deep investment expertise, has fueled its remarkable growth into one of the largest independent private credit platforms globally. HPS Investment Partners‘ distinctive origination platform, encompassing both non-sponsor and sponsor channels, and supported by a substantial and adaptable capital base, allows it to offer companies a diverse array of customized financing solutions. The firm’s leadership remains under the guidance of its founders and long-term Governing Partners: Scott Kapnick, Michael Patterson, Scot French, Purnima Puri, Faith Rosenfeld, Paul Knollmeyer, and Kathy Choi, ensuring continuity and stability.
BlackRock’s commitment to fixed income has been evident since its inception in 1988. The firm has cultivated its fixed income capabilities to serve clients through a $3 trillion platform, encompassing Fundamental Fixed Income under the leadership of Rick Rieder, as well as specialized units in Financial Institutions, Municipals, Systematic Fixed Income, Index Fixed Income, and iShares bond ETFs. BlackRock currently manages nearly $90 billion in private debt client assets, spanning sponsor- and non-sponsor-led core middle market direct lending in the U.S., European, and Asian markets, venture lending, investment grade private placements, and real estate debt, alongside dedicated private infrastructure debt. The addition of HPS Investment Partners will significantly expand this footprint.
This transaction will also substantially enhance BlackRock’s offerings for insurance clients. BlackRock is already a leading solutions provider for insurers, serving 100 Aladdin technology clients and managing $700 billion in assets under management for this sector. HPS Investment Partners is a recognized independent leader in providing private credit solutions tailored for insurance clients. The integration of HPS Investment Partners will position BlackRock as a comprehensive, fiduciary partner for insurance clients, offering a full spectrum of public-private asset management and technology solutions.
Mr. Fink further emphasized, “For over three and a half decades, BlackRock has evolved in lockstep with the capital markets. The acquisitions of GIP and now HPS Investment Partners demonstrate our strategic commitment to expanding our private markets capabilities across our comprehensive global platform. Our Aladdin technology, including eFront, and soon Preqin, will simplify and enhance access to private markets, making them more transparent than ever before. These capabilities, combined with our global reach, deep-rooted relationships, and cutting-edge technology, uniquely position us to serve our clients.”
Transaction Terms
Under the definitive agreement, BlackRock will acquire 100% of HPS Investment Partners‘ business and assets for a total consideration of 12.1 million SubCo Units. These SubCo Units are exchangeable on a one-for-one basis for BlackRock common stock at the holder’s discretion and carry equivalent dividend rights to BlackRock common stock.
The transaction consideration will be paid in tranches, with a portion at closing and the remainder deferred for approximately five years. Approximately 9.2 million SubCo Units will be disbursed at closing. A further 25% of the consideration, or 2.9 million SubCo Units, is scheduled for payment in approximately five years, contingent upon meeting certain post-closing conditions. Furthermore, there is a potential for additional consideration of up to 1.6 million SubCo Units, which is performance-based and tied to financial milestones measured and paid out in approximately five years. Of the total deal consideration, up to $675 million in value will be allocated to fund an equity retention pool for HPS Investment Partners employees, ensuring talent retention and alignment.
In aggregate, the maximum number of BlackRock common shares issuable upon exchange for SubCo Units, encompassing all tranches and potential performance-based payouts, would be approximately 13.7 million shares.
As part of the transaction closure, BlackRock anticipates retiring or refinancing approximately $400 million of existing HPS Investment Partners debt with cash. The transaction is projected to have a neutral impact on BlackRock’s leverage profile.
BlackRock remains committed to responsible capital management. Its capital allocation strategy prioritizes investments for growth, followed by returning excess capital to shareholders through a combination of dividends and a consistent share repurchase program. Over the past decade, BlackRock has repurchased 29 million shares at an average price of $498 per share, delivering a 15% annualized return for shareholders.
The acquisition is anticipated to increase private markets fee-paying AUM and management fees by 40% and approximately 35%, respectively. It is also expected to be modestly accretive to BlackRock’s as-adjusted earnings per share in the first full year following the close.
The transaction is projected to be finalized in mid-2025, subject to customary regulatory approvals and closing conditions.
Perella Weinberg Partners LP served as the lead financial advisor to BlackRock, with Morgan Stanley & Co. LLC also acting as a financial advisor. Skadden, Arps, Slate, Meagher & Flom LLP and Clifford Chance LLP provided legal counsel to BlackRock. J.P. Morgan Securities LLC served as the lead financial advisor to HPS Investment Partners, with Goldman Sachs & Co. LLC, BofA Securities, Inc., Deutsche Bank Securities Inc., BNP Paribas, and RBC Capital Markets serving as co-financial advisors. Fried, Frank, Harris, Shriver & Jacobson LLP acted as legal counsel for HPS Investment Partners.
Investor Conference Call and Webcast
BlackRock hosted an investor call on Tuesday, December 3, 2024, at 8:00 a.m. ET to discuss the transaction in detail. A replay of the webcast and the investor presentation are available on the investor relations section of BlackRock’s website at https://ir.blackrock.com/news-and-events/events-and-presentations/.
About BlackRock
BlackRock’s mission is to empower more individuals to achieve financial well-being. As a fiduciary to investors and a leading provider of financial technology, BlackRock simplifies and democratizes investing, helping millions build savings for life. For further information about BlackRock, please visit www.blackrock.com/corporate.
About HPS Investment Partners
HPS Investment Partners, LLC is a leading global, credit-focused alternative investment firm dedicated to delivering creative capital solutions and generating attractive risk-adjusted returns for its clients. With strategies spanning the capital structure, HPS Investment Partners invests in privately negotiated senior debt, junior capital solutions, liquid credit, asset-based finance, and real estate. The firm’s expansive platform allows for investments in companies of all sizes, utilizing both standard and customized solutions. Driven by intellectual rigor and discipline, HPS Investment Partners manages approximately $148 billion in assets as of September 2024. For more information, please visit www.hpspartners.com.
Forward-Looking Statements
This press release contains forward-looking statements subject to risks and uncertainties, including those related to the anticipated timing, consummation, and benefits of the acquisition of HPS Investment Partners. Actual results may differ materially due to various factors, including but not limited to market conditions, regulatory approvals, and integration risks. A comprehensive list of risk factors is available in BlackRock’s SEC filings, accessible at www.sec.gov and www.blackrock.com.
