(Bloomberg) — BlackRock Inc. is in advanced talks to buy HPS Investment Partners, emerging as the only suitor in active talks with the firm as the world’s largest asset manager seeks to compete in the fast-growing private credit industry.
The two sides are seeking to reach an agreement by the end of this year, according to people with knowledge of the discussions, who sought anonymity to discuss confidential matters. HPS could still opt for an initial public offering or minority stake sale if the parties fail to agree on valuation, some of the people said.
Read More: BlackRock Said to Be Among Suitors for Credit Firm HPS
A deal would leave BlackRock, which managed $11.5 trillion at the end of the third quarter, with more than $500 billion in alternative assets. HPS would aim for a post-IPO valuation of $11 billion, and for a sale it would seek a premium to that, the people said.
Wells Fargo & Co. analysts led by Michael Brown said in an Oct. 29 note that HPS could fetch about $12 billion in a potential acquisition by BlackRock.
While negotiations are progressing, a deal hasn’t yet been reached, and talks could conclude without an agreement, some of the people said. BlackRock declined to comment. HPS didn’t respond to a request for comment.
Chief Executive Officer Larry Fink has moved aggressively to expand his firm’s footprint in private markets, and buying HPS would mean BlackRock has clinched the two largest-ever acquisitions of alternative asset managers in the space of roughly 10 months. BlackRock is seeking to replicate its dominant scale in stock and bond markets in private assets, which are increasingly sought by pensions, insurers, sovereign wealth funds and wealthy retail clients.
Several weeks ago, the company completed a $12.5 billion acquisition of Global Infrastructure Partners, making BlackRock into the second-largest manager of infrastructure assets. It’s already in the final stages of closing a £2.55 billion ($3.3 billion) deal for private-markets data provider Preqin Ltd., which Fink has said will help the company “index the private markets” and lay the groundwork for ETFs to be tied to alternative assets.
HPS manages more than $100 billion, making it one of the largest independent managers in the surging private-credit market. That’s been pegged at $1.7 trillion, but proponents say the market encompasses a broader range of assets and could grow to between $20 trillion and $40 trillion.
Founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, the firm bought itself out of JPMorgan Chase & Co. in 2016, a complicated deal that valued it at close to $1 billion.