BlackRock $BLK (+0.12%) buys credit company for 12 billion dollars

BlackRock is acquiring the credit company HPS in a deal worth billions. This strengthens a business area in which the investment company was previously lagging behind the competition.

BlackRock and HPS Investment Partners have agreed on a takeover. The investment company is paying around 12 billion dollars in a share deal. With the acquisition, the world's largest asset manager is moving into the upper echelons of the private credit business.

HPS manages client assets of 148 billion dollars, according to a press release issued on Tuesday. Founded in 2007, the company is now one of the largest independent managers in the growing private credit market. BlackRock expects the acquisition to increase assets under management in the private markets by 40 percent and management fees by 35 percent.

Management remains on board

The founders of HPS, Scott Kapnick, Scot French and Michael Pattersonwill head a new business unit for private financing solutions at BlackRock. This will offer clients the full range of fixed income mutual funds and alternative credit funds, according to the statement.

"We offer both public and private markets, equities and bonds," said Larry FinkChief Executive Officer of Blackrock, according to Bloomberg in a call following the announcement. "The blending of public and private markets is a reality today." HPS was the only company in the fast-growing private credit industry that Blackrock had considered acquiring.

The purchase would make it one of the top five companies in private credit, with about $220 billion in assets, and still have room for growth in insurance clients and investment-grade private debt.

Performance dependent

The transaction is expected to be completed in the middle of next year. Around a quarter of the purchase price will be paid over five years, and further Blackrock shares are possible depending on performance. The deal also includes a retention package of up to 675 million dollars for HPS employees. BlackRock anticipates that approximately 400 million dollars of existing HPS debt will need to be repaid in cash or refinanced.

A few months ago, Blackrock had already made a major acquisition in the field of alternative investments with the purchase of Global Infrastructure Partners. In this deal with a price tag of 12.5 billion dollars, Blackrock became one of the largest managers of infrastructure assets with around 170 billion dollars.

Source: finews.ch