(Bloomberg) -- BlackRock Inc. is nearing a deal to buy HPS Investment Partners, a purchase that would vault the firm into the top ranks of private credit as it seeks to become a major force in alternative assets.
An agreement could be announced as early as this week and value HPS at $12 billion or more, according to people with knowledge of the matter, asking not to be identified because the information is private. BlackRock will pay for HPS with a mix of cash and stock, they said.
The buyer could issue securities to help fund the cash component of the transaction, one of the people said. While discussions are in the final stages, they could still be delayed or falter, the people said. The deal would leave BlackRock, which manages $11.5 trillion, with more than $500 billion of alternative assets.
Bloomberg News reported in October that BlackRock was interested in acquiring HPS and later that talks about a purchase were advancing and both sides were seeking a deal by end of the year. The Financial Times reported in November that a transaction was close.
BlackRock Chief Executive Officer Larry Fink has moved aggressively to expand in private markets, and buying HPS would mean BlackRock has clinched the two largest-ever acquisitions of alternative asset managers in less than a year. BlackRock, already the biggest manager of public equity and bond portfolios, is seeking to replicate that scale in the private assets increasingly sought by pensions, insurers, sovereign wealth funds and rich individuals.
Larry Fink, chairman and chief executive officer of BlackRock Inc., during a Bloomberg Television interview in New York, US, on Tuesday, March 26, 2024. Fink today said the US public debt situation "is more urgent than I can ever remember" and that the country needs to adopt policies to spur economic growth. Photographer: Jeenah Moon/Bloomberg
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In October, the company completed a $12.5 billion acquisition of Global Infrastructure Partners, making BlackRock the second-largest manager of infrastructure assets with about $170 billion. It’s already in the final stages of completing a £2.55 billion ($3.25 billion) deal for private-markets data provider Preqin, which Fink has vowed will help the firm “index the private markets” and lay the groundwork to tie exchange-traded funds to alternative assets.
HPS would turbocharge BlackRock’s ability to compete in one of finance’s hottest and most lucrative areas: private credit. HPS manages $123 billion in private credit, making it one of the largest independent managers in that surging $1.6 trillion market. It oversees an additional $22 billion in public credit and has more than 760 employees.
Founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, the firm bought itself out of JPMorgan Chase & Co. in 2016 in a deal that valued it at almost $1 billion. HPS had been pursuing a potential initial public offering that would’ve valued the firm at $10 billion or more, Bloomberg News reported in September.
With HPS, BlackRock’s alternative-investments business would be larger than that of Carlyle Group Inc. and begin to rival — at least in size — private-asset leaders such as KKR & Co. and Apollo Global Management Inc. Blackstone Inc. is still considerably larger, with about $1.1 trillion of assets at the end of the third quarter.
BlackRock’s expansion into private markets would add considerable revenue and profit to the firm, as investors shifted aggressively over the past decade to low-cost index funds and ETFs and away from higher-fee active mutual funds.
A representative for BlackRock declined to comment, while spokespeople for HPS didn’t immediately respond to requests for comment.
