- HPS Investment Partners is a leading global credit investment
manager that provides creative capital solutions across $148
billion in client assets
- This combination creates an integrated private credit franchise
with ~$220 billion in client assets
- Expected to increase private markets fee-paying AUM and
management fees by 40% and ~35%, respectively
- Transaction structured for leadership continuity and alignment
with BlackRock’s shareholders, with proceeds paid in BlackRock
equity
- HPS leadership team will lead a new, combined business
unit
BlackRock (NYSE: BLK) and HPS Investment Partners (“HPS”), a
leading global credit investment manager with approximately $148
billion in client assets, have entered into a definitive agreement
for BlackRock to acquire HPS for approximately $12 billion, with
100% of consideration paid in BlackRock equity. The equity is
issued by a wholly-owned subsidiary of BlackRock (“SubCo Units”),
and exchangeable on a one-for-one basis into BlackRock common
stock.
The future of fixed income is building public and private
portfolios to optimize liquidity, yield, and diversification. This
transaction will bring together BlackRock’s strong corporate and
asset owner relationships with HPS’s diversified origination and
capital flexibility. The combined private credit franchise will
work side-by-side with BlackRock’s $3 trillion public fixed income
business to provide both public and private income solutions for
clients across their whole portfolios.
“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,” said Laurence D. Fink,
BlackRock Chairman and CEO.
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.
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 $4.5
trillion 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 Mr. Kapnick will be an
observer to the BlackRock Board of Directors.
“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,” said Scott
Kapnick, HPS CEO.
Founded in 2007, HPS is a leading global credit investment
manager with capabilities across the capital structure. HPS has
continually demonstrated its ability to identify, structure, and
execute compelling investments, and its extensive investing
expertise coupled with the firm’s strong track record has fueled
its growth into one of the largest independent private credit
platforms. HPS’s differentiated origination platform, which spans
non-sponsor and sponsor channels, underpinned by a scaled and
flexible capital base, offers companies a wide range of bespoke
financing solutions. 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.
Mr. 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.”
Terms of the Transaction
Under the terms of the transaction, BlackRock will acquire 100%
of the business and assets of HPS for total consideration of 12.1
million SubCo Units.
SubCo Units are exchangeable on a one-for-one basis into
BlackRock common stock at the election of the holder, and will have
equivalent dividend rights to BlackRock common stock.
A portion of the transaction consideration will be paid at
closing, and a portion will be deferred approximately five years.
Approximately 9.2 million SubCo Units will be paid at closing.
Approximately 25% of the consideration, or 2.9 million SubCo Units,
will be paid in approximately five years, subject to achievement of
certain post-closing conditions. There is also potential for
additional consideration to be earned of up to 1.6 million SubCo
Units that is based on financial performance milestones measured
and paid in approximately five years. Of the total deal
consideration, up to $675 million in value will be used to fund an
equity retention pool for HPS employees.
In aggregate, inclusive of all SubCo Units paid at closing,
eligible to be paid in approximately five years, and potentially
earned through achievement of financial performance milestones, the
maximum amount of BlackRock common stock issuable upon exchange for
SubCo Units would be approximately 13.7 million shares.
As part of closing the transaction, BlackRock expects to retire
for cash, or refinance, approximately $400 million of existing HPS
debt. The transaction is not expected to meaningfully change
BlackRock’s leverage profile.
BlackRock is committed to being a good steward of shareholders’
capital. Its capital management strategy is to first invest for
growth, and then return excess capital to shareholders through a
combination of dividends and a consistent share repurchase program.
Over the last ten years BlackRock has repurchased 29 million
shares, at an average repurchase price of $498 per share, which
represents a 15% annualized return for shareholders.
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.
Perella Weinberg Partners LP served as lead financial advisor to
BlackRock. Morgan Stanley & Co. LLC also served as financial
advisor, with Skadden, Arps, Slate, Meagher & Flom LLP and
Clifford Chance LLP acting as legal counsel. J.P. Morgan Securities
LLC served as lead financial advisor to HPS, with Goldman Sachs
& Co. LLC, BofA Securities, Inc., Deutsche Bank Securities
Inc., BNP Paribas, and RBC Capital Markets acting as co-financial
advisors and Fried, Frank, Harris, Shriver & Jacobson LLP
serving as legal counsel.
Teleconference and Webcast Details
BlackRock will hold an investor call on Tuesday, December 3,
2024 at 8:00 a.m. ET to discuss the transaction.
Members of the public who are interested in participating in the
teleconference should dial, from the United States, (313) 209-4906,
or from outside the United States, (877) 502-9276, shortly before
8:00 a.m. ET and reference the BlackRock Conference Call (ID Number
6786819). A live, listen-only webcast will also be available via
the investor relations section of www.blackrock.com.
The webcast will be available for replay by 11:00 a.m. ET on
Tuesday, December 3, 2024. To access the replay of the webcast,
please visit the investor relations section of
www.blackrock.com.
An investor presentation with additional details about the
transaction is also available on the “Events & Presentations”
section of the investor relations website:
https://ir.blackrock.com/news-and-events/events-and-presentations/
About BlackRock
BlackRock’s purpose is to help more and more people experience
financial well-being. As a fiduciary to investors and a leading
provider of financial technology, we help millions of people build
savings that serve them throughout their lives by making investing
easier and more affordable. For additional information on
BlackRock, please visit www.blackrock.com/corporate.
About HPS Investment Partners
HPS Investment Partners, LLC is a leading global, credit-focused
alternative investment firm that seeks to provide creative capital
solutions and generate attractive risk-adjusted returns for our
clients. We manage various strategies across the capital structure,
including privately negotiated senior debt; privately negotiated
junior capital solutions in debt, preferred and equity formats;
liquid credit including syndicated leveraged loans, collateralized
loan obligations and high yield bonds; asset-based finance and real
estate. The scale and breadth of our platform offers the
flexibility to invest in companies large and small, through
standard or customized solutions. At our core, we share a common
thread of intellectual rigor and discipline that enables us to
create value for our clients, who have entrusted us with
approximately $148 billion of assets under management as of
September 2024. For more information, please visit
www.hpspartners.com.
Contacts
Forward Looking Statements
This press release, and other statements that BlackRock may
make, may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act, with respect to
BlackRock’s future financial or business performance, strategies or
expectations, including the anticipated timing, consummation and
expected benefits of the proposed HPS Investment Partners (“HPS”)
transaction and HPS’s projected financial performance. Forward
looking statements are typically identified by words or phrases
such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,”
“comfortable,” “expect,” “anticipate,” “current,” “intention,”
“estimate,” “position,” “assume,” “outlook,” “continue,” “remain,”
“maintain,” “sustain,” “seek,” “achieve,” and similar expressions,
or future or conditional verbs such as “will,” “would,” “should,”
“could,” “may” and similar expressions.
BlackRock cautions that forward-looking statements are subject
to numerous assumptions, risks and uncertainties, which change over
time and may contain information that is not purely historical in
nature. Such information may include, among other things,
projections and forecasts. There is no guarantee that any forecasts
made will come to pass. Forward-looking statements speak only as of
the date they are made, and BlackRock assumes no duty to and does
not undertake to update forward-looking statements. Actual results
could differ materially from those anticipated in forward-looking
statements and future results could differ materially from
historical performance.
BlackRock has previously disclosed risk factors in its
Securities and Exchange Commission (“SEC”) reports. These risk
factors and those identified elsewhere in this press release, among
others, could cause actual results to differ materially from
forward-looking statements or historical performance and include:
(1) the introduction, withdrawal, success and timing of business
initiatives and strategies; (2) changes and volatility in
political, economic or industry conditions, the interest rate
environment, foreign exchange rates or financial and capital
markets, which could result in changes in demand for products or
services or in the value of assets under management; (3) the
relative and absolute investment performance of BlackRock’s
investment products; (4) BlackRock’s ability to develop new
products and services that address client preferences; (5) the
impact of increased competition; (6) the impact of recent or future
acquisitions or divestitures, including the acquisitions of HPS
(the “HPS Transaction”), Preqin (the “Preqin Transaction”) and
Global Infrastructure Partners (together with the HPS Transaction
and the Preqin Transaction, the “Transactions”); (7) BlackRock’s
ability to integrate acquired businesses successfully, including
the Transactions; (8) risks related to the HPS Transaction and the
Preqin Transaction, including delays in the expected closing date
of the HPS Transaction or the Preqin Transaction, the possibility
that either or both of the HPS Transaction or the Preqin
Transaction does not close, including, but not limited to, due to
the failure to satisfy the closing conditions; the possibility that
expected synergies and value creation from the HPS Transaction or
the Preqin Transaction will not be realized, or will not be
realized within the expected time period; and the risk of impacts
to business and operational relationships related to disruptions
from the HPS Transaction or the Preqin Transaction; (9) the
unfavorable resolution of legal proceedings; (10) the extent and
timing of any share repurchases; (11) the impact, extent and timing
of technological changes and the adequacy of intellectual property,
data, information and cybersecurity protection; (12) the failure to
effectively manage the development and use of artificial
intelligence; (13) attempts to circumvent BlackRock’s operational
control environment or the potential for human error in connection
with BlackRock’s operational systems; (14) the impact of
legislative and regulatory actions and reforms, regulatory,
supervisory or enforcement actions of government agencies and
governmental scrutiny relating to BlackRock; (15) changes in law
and policy and uncertainty pending any such changes; (16) any
failure to effectively manage conflicts of interest; (17) damage to
BlackRock’s reputation; (18) increasing focus from stakeholders
regarding ESG matters; (19) geopolitical unrest, terrorist
activities, civil or international hostilities, and other events
outside BlackRock’s control, including wars, natural disasters and
health crises, which may adversely affect the general economy,
domestic and local financial and capital markets, specific
industries or BlackRock; (20) climate-related risks to BlackRock's
business, products, operations and clients; (21) the ability to
attract, train and retain highly qualified and diverse
professionals; (22) fluctuations in the carrying value of
BlackRock’s economic investments; (23) the impact of changes to tax
legislation, including income, payroll and transaction taxes, and
taxation on products, which could affect the value proposition to
clients and, generally, the tax position of BlackRock; (24)
BlackRock’s success in negotiating distribution arrangements and
maintaining distribution channels for its products; (25) the
failure by key third-party providers of BlackRock to fulfill their
obligations to BlackRock; (26) operational, technological and
regulatory risks associated with BlackRock’s major technology
partnerships; (27) any disruption to the operations of third
parties whose functions are integral to BlackRock’s exchange-traded
funds platform; (28) the impact of BlackRock electing to provide
support to its products from time to time and any potential
liabilities related to securities lending or other indemnification
obligations; and (29) the impact of problems, instability or
failure of other financial institutions or the failure or negative
performance of products offered by other financial institutions.
BlackRock’s Annual Report on Form 10–K, Quarterly Reports on Form
10-Q and BlackRock’s subsequent filings with the SEC, accessible on
the SEC’s website at www.sec.gov and on BlackRock’s website at
www.blackrock.com, discuss these factors in more detail and
identify additional factors that can affect forward–looking
statements. The information contained on BlackRock’s website is not
a part of this press release, and therefore, is not incorporated
herein by reference.
BlackRock reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP”); however, management believes BlackRock’s ongoing
operating results may be enhanced if investors have additional
non–GAAP financial measures. Management reviews non-GAAP financial
measures to assess ongoing operations and considers them to be
helpful, for both management and investors, in evaluating
BlackRock’s financial performance over time. Management also uses
non-GAAP financial measures as a benchmark to compare its
performance with other companies and to enhance the comparability
of this information for the reporting periods presented. Non-GAAP
measures may pose limitations because they do not include all of
BlackRock’s revenue and expense. BlackRock’s management does not
advocate that investors consider such non-GAAP financial measures
in isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. Non-GAAP measures may not be
comparable to other similarly titled measures of other
companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241203219893/en/
BlackRock Media Relations Patrick Scanlan 212-810-3622
patrick.scanlan@blackrock.com
BlackRock Investor Relations Caroline Rodda 212-810-3442
caroline.rodda@blackrock.com
HPS Investment Partners Mike Geller / Josh Clarkson
646-818-9018 / 646-818-9259 mgeller@prosek.com /
jclarkson@prosek.com
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