BlackRock to acquire HPS Investment Partners for about $12B

BlackRock (BLK) and HPS Investment Partners, a global credit investment manager with approximately $148B in client assets, have entered into a definitive agreement for BlackRock to acquire HPS for approximately $12B, 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. 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. .