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BlackRock has a handshake deal to buy HPS Investment Partners, as the world’s largest asset manager looks to bolster its alternative investment business with the addition of one of the biggest private credit groups on Wall Street.
The two sides have agreed on the broad outline of the deal with an eye towards announcing general terms after the Thanksgiving holiday, according to four people with knowledge of the matter.
HPS, which was founded less than two decades ago by Goldman Sachs’ former head of investment banking Scott Kapnick, had previously this year been working towards an initial public offering that would have valued the company at about $10bn. A sale could offer a significant premium over that price. Two sources said the final price would be closer to $12bn than $10bn.
While it is possible that the deal could fall through, BlackRock prides itself on being able to offer near certainty to its acquisition partners.
A deal would mark the latest expansionary move by BlackRock, which has $11.5tn in assets under management and has been on a big acquisition spree. Founder Larry Fink has set his sights on bolstering its footprint in the rapidly growing alternative assets business, which carries much higher fees than the exchanged-traded funds that powered its previous growth.
Last month BlackRock completed a $12.5bn acquisition of infrastructure investment firm Global Infrastructure Partners. It also agreed in July to purchase Preqin, a UK private markets data group, for £2.55bn in cash.
BlackRock is also in talks with Millennium Management about a tie-up that could see the asset manager buy a minority stake in Izzy Englander’s $69.5bn multi-strategy hedge fund manager.
HPS has become a behemoth in the private credit industry since its founding as a JPMorgan Chase unit in 2007, managing nearly $150bn at the end of September. It was an early and prolific investor in the space, and has benefited as traditional banks retrenched from some of their core lending franchises as post-crisis regulations damped their returns or pushed them out of businesses altogether.
The private credit firm is one of the most sought after money managers in the private investment industry. It is one of the few privately held private credit managers of its size able to move the needle for an acquirer such as BlackRock, which is keen to catapult ahead in the burgeoning asset class as competitors like Ares, Apollo and Blackstone take market share.
HPS did not respond to a request for comment. BlackRock declined to comment. It has $450bn in alternative assets under management, now that the GIP deal has closed.
Additional reporting by James Fontanella-Khan and Antoine Gara