In a significant move to expand its footprint in the burgeoning private credit market, BlackRock, Inc. (NYSE: BLK), the world’s largest asset manager, has announced a definitive agreement to acquire Hps Investment Partners Llc, a leading global credit investment firm managing approximately $148 billion in assets. The acquisition, valued at around $12 billion, will be settled entirely in BlackRock equity, marking a strong commitment to the alternative investment space and particularly to HPS Investment Partners LLC.
This strategic acquisition unites BlackRock’s extensive network of corporate and asset owner relationships with the deep-seated origination capabilities and capital deployment flexibility of HPS Investment Partners LLC. The integration of these two industry powerhouses is poised to create a comprehensive private credit platform operating in conjunction with BlackRock’s existing $3 trillion public fixed income business. This synergy aims to deliver a seamless suite of public and private income solutions tailored to meet the diverse needs of clients across their investment portfolios.
“The future of fixed income is about constructing portfolios that skillfully blend public and private assets to optimize liquidity, yield, and diversification,” stated Laurence D. Fink, Chairman and CEO of BlackRock. “I am thrilled about the potential of HPS Investment Partners LLC and BlackRock coming together for our clients. We eagerly anticipate welcoming Scott Kapnick, Scot French, and Michael Patterson, along with the entire HPS Investment Partners LLC team, to BlackRock. Proactively anticipating our clients’ evolving needs is paramount, and with the scale, capabilities, and specialized expertise of HPS Investment Partners LLC, BlackRock is uniquely positioned to offer clients integrated solutions that bridge the public and private markets.”
The acquisition of HPS Investment Partners LLC arrives at a pivotal time, as durable global economic growth necessitates increased debt financing, and private capital emerges as a crucial source to fill this demand. By integrating HPS Investment Partners LLC, BlackRock is set to enhance its capacity to connect a wide spectrum of businesses, from small and medium-sized enterprises to large corporations, with essential financing. This capital infusion is vital for investments that underpin economic expansion and foster job creation on a global scale.
The structural shift towards private credit is propelled by market dynamics, technological advancements, and evolving regulatory landscapes that favor efficient capital deployment. BlackRock projects a robust expansion of the private debt market, anticipating it will more than double to an impressive $4.5 trillion by 2030. The inherent characteristics of private credit, including duration, attractive returns, and yield profiles, align perfectly with the investment objectives of clients with long-term capital horizons. These include major institutional investors such as insurance companies, pension funds, sovereign wealth funds, as well as wealth managers and individuals saving for retirement.
Upon completion of the transaction, BlackRock and HPS Investment Partners LLC will establish a new private financing solutions business unit. This unified entity will be spearheaded by Scott Kapnick, Scot French, and Michael Patterson, current leaders at HPS Investment Partners LLC. The combined platform will boast extensive capabilities spanning senior and junior credit solutions, asset-based finance, real estate financing, private placements, and collateralized loan obligations (CLOs). Furthermore, to deliver 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 strategic combination is designed to provide an end-to-end solution for both clients and borrowers across the spectrum of corporate and asset-based finance, covering investment and non-investment grade opportunities within private credit. As part of this transformative partnership, Messrs. Kapnick, French, and Patterson will join BlackRock’s Global Executive Committee, and Mr. Kapnick will take on the role of observer to the BlackRock Board of Directors, ensuring seamless integration and strategic alignment.
Scott Kapnick, CEO of HPS Investment Partners LLC, remarked, “Today signifies a landmark moment in our pursuit to become the foremost provider of private financing solutions worldwide. Partnering with BlackRock will significantly amplify our position in this rapidly expanding yet increasingly competitive market. The fusion of HPS Investment Partners LLC’s established culture of investment rigor with BlackRock’s unparalleled global reach will unlock unprecedented opportunities for our investors and employees. This strategic alignment sets the stage for sustained success well into the next decade and beyond. My partners and I are eager to collaborate with Larry Fink and our new colleagues at BlackRock.”
Founded in 2007, HPS Investment Partners LLC has solidified its position as a premier global credit investment manager, proficient across the entire capital structure. The firm has consistently demonstrated a robust ability to identify, structure, and execute compelling investments. This expertise, coupled with a proven track record, has propelled HPS Investment Partners LLC to become one of the largest independent private credit platforms globally. HPS Investment Partners LLC’s differentiated origination platform, encompassing both non-sponsor and sponsor channels and supported by a scalable and adaptable capital base, enables the firm to offer companies a broad array of customized financing solutions. The firm’s leadership remains in the hands 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, evolving into a $3 trillion platform. This platform includes 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 approximately $90 billion in private debt client assets, focusing on sponsor-led and non-sponsor-led core middle market direct lending across the U.S., European, and Asian markets, venture lending, investment grade private placements, and real estate debt, in addition to dedicated private infrastructure debt.
This acquisition is particularly strategic for enhancing BlackRock’s offerings to 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 LLC is recognized as a leading independent private credit provider to insurance clients. The integration of HPS Investment Partners LLC will enable BlackRock to become a full-service, fiduciary provider of both public and private asset management, along with technology solutions specifically designed for insurance clients.
Mr. Fink concluded, “For over 35 years, BlackRock has consistently grown and adapted alongside the evolving capital markets. With the additions of GIP and now HPS Investment Partners LLC, we are significantly expanding our private markets capabilities across our comprehensive global platform. Our Aladdin technology, including eFront, and soon Preqin, will streamline and enhance access to private markets, making them more transparent and efficient. These enhanced capabilities, combined with our global reach, strong client relationships, and cutting-edge technology, distinctly position us to better serve our clients.”
Transaction Terms
Under the acquisition agreement, BlackRock will acquire 100% of HPS Investment Partners LLC’s business and assets for a total consideration of 12.1 million SubCo Units. These SubCo Units are exchangeable one-for-one 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 two parts: a significant portion at closing and the remainder deferred for approximately five years. Roughly 9.2 million SubCo Units will be paid upon closing, with approximately 25% of the consideration, or 2.9 million SubCo Units, to be paid in about five years, contingent upon meeting certain post-closing conditions. Additionally, there is a potential for up to 1.6 million SubCo Units in additional consideration based on achieving financial performance milestones within approximately five years. Of the total deal consideration, up to $675 million in value is earmarked to fund an equity retention pool for HPS Investment Partners LLC employees, ensuring talent retention and continued growth.
In total, including all SubCo Units paid at closing, those eligible to be paid in approximately five years, and those potentially earned through performance milestones, the maximum number of BlackRock common shares issuable upon exchange for SubCo Units would be approximately 13.7 million shares.
As part of finalizing the transaction, BlackRock anticipates retiring or refinancing approximately $400 million of existing debt at HPS Investment Partners LLC. The transaction is projected to have a neutral impact on BlackRock’s leverage profile.
BlackRock reaffirms its commitment to responsible capital management, prioritizing investments for growth and returning excess capital to shareholders through 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 expected to increase BlackRock’s private markets fee-paying AUM and management fees by 40% and approximately 35%, respectively. It is also anticipated to be modestly accretive to BlackRock’s as-adjusted earnings per share within the first full year following the closing.
The transaction is expected to be finalized by mid-2025, pending regulatory approvals and customary closing conditions.
Perella Weinberg Partners LP acted as the lead financial advisor to BlackRock, with Morgan Stanley & Co. LLC also serving 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 LLC, with Goldman Sachs & Co. LLC, BofA Securities, Inc., Deutsche Bank Securities Inc., BNP Paribas, and RBC Capital Markets as co-financial advisors. Fried, Frank, Harris, Shriver & Jacobson LLP served as legal counsel to HPS Investment Partners LLC.
Investor Teleconference and Webcast
BlackRock hosted an investor call on Tuesday, December 3, 2024, at 8:00 a.m. ET to discuss the transaction. A replay of the webcast and related investor presentation are available on BlackRock’s investor relations website.
About BlackRock
BlackRock’s mission is to enhance financial well-being for an increasing number of people. As a fiduciary to investors and a leader in financial technology, BlackRock facilitates easier and more affordable investing for millions globally. For more details 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 providing innovative capital solutions and generating attractive risk-adjusted returns for its clients. With strategies spanning the capital structure, HPS Investment Partners LLC manages a diverse portfolio, including privately negotiated debt and equity solutions, liquid credit, asset-based finance, and real estate. As of September 2024, HPS Investment Partners LLC managed approximately $148 billion in assets. For further information, please visit www.hpspartners.com.
Forward-Looking Statements
This press release contains forward-looking statements subject to risks and uncertainties, detailed in the full press release.
Contacts
BlackRock Media Relations
Patrick Scanlan
212-810-3622
[email protected]
BlackRock Investor Relations
Caroline Rodda
212-810-3442
[email protected]
HPS Investment Partners
Mike Geller / Josh Clarkson
646-818-9018 / 646-818-9259
[email protected] / [email protected]
