BlackRock said the private debt market is due to more than double to $4.5 trillion in 2030.

BlackRock has agreed to buy global credit investment manager HPS Investment Partners, a business with about $148 billion of client assets, for a purchase price of around $12 billion.

The US-listed group is buying HPS entirely with BlackRock equity, exchangeable on a one-for-one basis into BlackRock common stock. A portion of the transaction consideration will be paid at closing, and a portion will be deferred for around five years.

The deal is expected to increase private markets fee-paying AuM and management fees by 40 per cent and about 35 per cent, respectively, and be modestly accretive to BlackRock’s as-adjusted earnings per share in the first full year post-close.

HPS, founded in 2007, is led by its founders and long-term governing partners Scott Kapnick, Michael Patterson, Scot French, Purnima Puri, Faith Rosenfeld, Paul Knollmeyer, and Kathy Choi.

BlackRock and HPS will form a new private financing solutions business unit led by Kapnick (HPS chief executive), Scot French, and Michael Patterson. Y Kapnick, French, and Patterson will join the firm’s global executive committee and Kapnick will be an observer to the BlackRock board of directors.

The move is an example of how private credit, once a relatively niche area, is a growing sector that large asset managers want to tap into. BlackRock said it expects the private debt market will more than double to $4.5 trillion by 2030.

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, BlackRock said in a statement yesterday. 

Adding HPS to BlackRock’s business will enable it to “connect companies of all sizes, from small and medium-sized businesses to large corporations,” BlackRock 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,” Laurence D Fink, BlackRock chairman and CEO, said. 

“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 said. 

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). 

“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,” Kapnick said. 

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, it said.

The transaction is expected to close in mid-2025 subject to regulatory approvals and customary closing conditions.

Perella Weinberg Partners was lead financial advisor to BlackRock. Morgan Stanley also served as financial advisor with Skadden, Arps, Slate, Meagher & Flom and Clifford Chance acting as legal counsel. JP Morgan Securities was lead financial advisor to HPS, with Goldman Sachs, BofA Securities, Deutsche Bank Securities, BNP Paribas, and RBC Capital Markets acting as co-financial advisors and Fried, Frank, Harris, Shriver & Jacobson serving as legal counsel.