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HPS Investment Partners is talking to potential buyers including BlackRock as the top leadership of the private credit firm looks towards a deal that could value the business at more than $10bn, according to people familiar with the process.
HPS, which had $117bn in assets under management as of June, is also exploring an initial public offering. It has been seen as one of the few freestanding options for large financial companies looking to add a substantial private credit manager.
BlackRock, the world’s largest money manager with $10.6tn in assets, has been openly seeking deals that would boost its presence in alternative investments including private equity, private credit and infrastructure.
Chief executive Larry Fink has targeted that area for growth in part because it carries higher fees than the index products that have been BlackRock’s bread and butter. It closed the $12.5bn purchase of Global Infrastructure Partners earlier this month. BlackRock manages $85bn in private credit assets.
One person familiar with the talks called it a “giant AUM land grab” by BlackRock in alternative assets.
The people said it was not clear whether a deal would result, adding that HPS, which was spun out of JPMorgan, has had conversations with other potential partners. HPS declined to comment. BlackRock said it does not comment on market rumours. News of the talks between HPS and BlackRock was reported earlier by Bloomberg.
The talks coincide with conversations inside HPS about its listing. It has held early meetings with would-be investors and had initially indicated it planned to float in late September. But recently the firm delayed those plans, telling investors it could list after November’s US presidential election.
The move was seen as an indication that HPS might pursue a sale instead, one potential investor said. HPS had previously held talks with CVC about a combination, according to people familiar with the matter.
A person familiar with the deal talks said participants have been hoping conversations with potential IPO investors would provide more clarity on the valuation of the private credit firm.
In recent months HPS has worked to expand its own operations beyond that core business, selling a stake in its business to Guardian Life Insurance. In return, the insurance company handed HPS nearly $30bn in assets to manage.
The company was founded as a division of JPMorgan by three Goldman Sachs alumni. They include current HPS CEO Scott Kapnick, a former head of investment banking at Goldman.
There have been a number of tie-ups between private credit specialists with either traditional asset managers or private equity firms as more companies turn to non-bank sources for their borrowing. PE groups view unlisted credit as a way of generating more stable returns than more cyclical buyout and real estate businesses.
TPG last year agreed to buy Angelo Gordon for $2.7bn. That followed Brookfield’s purchase of a majority stake in Oaktree in 2019 and Franklin Templeton’s and T Rowe Price’s respective acquisitions of Benefit Street Partners and Oak Hill Advisors.