Blackrock (BLK), one of the leading asset managers, has agreed to buy HPS Investment Partners in a deal that could be valued at $12 billion. Blackrock seeks to fortify its alternative investments business by acquiring one of the largest private credit firms that managed nearly $150 billion as of September end. The Financial Times was the first to report the deal. BLK shares jumped over 2% in after-hours trading yesterday.
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The two parties have reportedly agreed on the broader terms of the deal. The acquisition could be announced as soon as the Thanksgiving holiday is over. HPS was believed to be considering an IPO (initial public offering) earlier this year, which could have valued it at roughly $10 billion. Hence, the acquisition by Blackrock could be priced at a premium, sources familiar with the matter said.
Here’s Why Blackrock Is Buying HPS
HPS manages several alternative spaces such as debt, liquid credit, leveraged loans, asset-based financing, as well as real estate. HPS could still go ahead with its IPO plans if the deal with Blackrock fails.
Blackrock has been on a buying spree this year, with its recent acquisition of Global Infrastructure Partners (GIP) valued at $12.5 billion. It even acquired UK-based data firm Preqin for $3.2 billion in July.
The company under the leadership of founder Larry Fink is aiming to be a bigger player in the fast-growing alternative investments space. Blackrock already has a dominant position in the asset management industry, managing approximately $11.5 trillion in assets. The alternative investments market is said to carry much higher management fees than other spaces such as ETFs (Exchange Traded Funds).
Insights from TipRanks’ Bulls Say, Bears Say Tool
The potential acquisition of HPS and Blackrock’s recent string of takeovers has drawn the attention of both bulls and bears. According to TipRanks’ Bulls Say, Bears Say tool, some analysts are impressed with Blackrock’s solid financial performance in terms of organic base fee, its broad product offerings, including fixed income and alternatives, and the potential acquisition of HPS that would bolster its position in the private credit market.
On the other hand, bears are cautious about the HPS takeover since it could be slightly dilutive to EPS (earnings per share) and the fact that the growing number of deals has tightened BLK’s financial flexibilty.
Is Blackrock Stock a Good Buy?
Considering its strategic positioning in the asset management industry, analysts remain highly optimistic about Blackrock stock. On TipRanks, BLK stock has a Strong Buy consensus rating based on 13 Buys and two Hold ratings. Also, the average Blackrock price target of $1,065.07 implies 4.5% upside potential from current levels. Meanwhile, BLK shares have gained 27.9% so far this year.
