BlackRock and HPS Investment Partners, a global credit investment manager with approximately $148bn in client assets, have entered into a definitive agreement for BlackRock to acquire HPS for approximately $12bn, with 100% of consideration paid in BlackRock equity.
The equity is issued by a wholly-owned subsidiary of BlackRock and exchangeable on a one-for-one basis into BlackRock common stock, the asset manager said in a statement today (3 December).
The combined private credit franchise will work side-by-side with BlackRock’s $3trn public fixed income business to provide both public and private income solutions for clients across their whole portfolios.
Laurence D. Fink (pictured), BlackRock chairman and CEO said: “I am excited by what HPS and BlackRock can do together for our clients and look forward to welcoming Scott Kapnick, Scot French, and Michael Patterson, along with the entire HPS team, to BlackRock.
“We have always sought to position ourselves ahead of our clients’ needs. Together with the scale, capabilities, and expertise of the HPS team, BlackRock will deliver clients solutions that seamlessly blend public and private.”
Durable global growth will require higher volumes of debt financing and markets are increasingly looking to private capital as an answer. The addition of HPS will position BlackRock to connect companies of all sizes, from small and medium-sized businesses to large corporations, with financing for investments that support economic growth and job creation, the statement continued.
Market forces, technology, and regulation are consistently moving financial activity to where it can be done most efficiently, making private credit a structural growth segment. BlackRock expects the private debt market will more than double to $4.5trn by 2030.
The duration, returns, and yield characteristics of private credit match the needs of clients with long-dated capital, including insurance companies, pensions, sovereign wealth funds, wealth managers, and investors saving for retirement.
BlackRock and HPS will form a new private financing solutions business unit led by Scott Kapnick, Scot French, and Michael Patterson. This combined platform will have broad capabilities across senior and junior credit solutions, asset-based finance, real estate, private placements, and CLOs.
To develop a full-service financing solution for alternative asset managers, the business will unite direct lending, fund finance, and BlackRock’s GP and LP solutions (fund of funds, GP/LP secondaries, co-investments).
This combination creates an integrated solution for clients and borrowers across corporate and asset-based finance, investment and non-investment grade and private credit. As part of this transaction, Messrs. Kapnick, French, and Patterson will join BlackRock’s Global Executive Committee and Kapnick will be an observer to the BlackRock Board of Directors.
Scott Kapnick, HPS CEO said:“Today marks an important milestone in our drive to become the world’s leading provider of private financing solutions. Our partnership with BlackRock will further strengthen our position in this fast growing but increasingly competitive market.
“The combination of HPS’s proven culture of investment discipline with BlackRock’s global reach will allow us to seize new opportunities for our investors and employees and set us up for continued success for the next decade and beyond. My partners and I are energized to work with Larry Fink and our new BlackRock colleagues.”
Founded in 2007, HPS is a global credit investment manager with capabilities across the capital structure. The firm continues to be led by its founders and long-term Governing Partners Scott Kapnick, Michael Patterson, Scot French, Purnima Puri, Faith Rosenfeld, Paul Knollmeyer, and Kathy Choi.
Since BlackRock’s founding in 1988, the firm has grown its fixed income capabilities, and now serves clients through a $3 trillion platform across Fundamental Fixed Income, led by Rick Rieder, as well as Financial Institutions, Municipals, Systematic Fixed Income, Index Fixed Income, and iShares bond ETFs. BlackRock manages nearly $90 billion in private debt client assets across sponsor- and non-sponsor-led core middle market direct lending in U.S., European, and Asian markets, venture lending, investment grade private placements, and real estate debt, as well as dedicated private infrastructure debt.
This transaction will deepen BlackRock’s capabilities for insurance clients. BlackRock is a leading provider of solutions for insurers, which represent 100 Aladdin technology clients and $700 billion in assets under management at BlackRock. HPS is a leading independent provider of private credit for insurance clients. The addition of HPS will position BlackRock to be a full-service, fiduciary provider of public-private asset management and technology solutions for insurance clients.
Fink continued: “For over 35 years, BlackRock has grown and evolved alongside the capital markets. With GIP, and now HPS, we are expanding our private markets capabilities across our comprehensive global platform. Our Aladdin technology, including eFront, and soon Preqin, will make access to private markets simpler and more transparent. These capabilities, together with our global reach, deep relationships, and powerful technology, differentiate our ability to serve clients.”
The deal is expected to increase private markets fee-paying AUM and management fees by 40% and approximately 35%, respectively, and be modestly accretive to BlackRock’s as-adjusted earnings per share in the first full year post-close.
The transaction is expected to close in mid-2025 subject to regulatory approvals and customary closing conditions.
