BlackRock to Acquire HPS Investment Partners to Deliver Integrated Solutions Across Public and Private Markets

 

- HPS Investment Partners is a leading global credit investment manager that
provides creative capital solutions across $148 billion in client assets
- This combination creates an integrated private credit franchise with ~$220 billion
in client assets
- Expected to increase private markets fee-paying AUM and management fees by
40% and ~35%, respectively
- Transaction structured for leadership continuity and alignment with BlackRock’s
shareholders, with proceeds paid in BlackRock equity
- HPS leadership team will lead a new, combined business unit

NEW YORK – December 3, 2024 – BlackRock (NYSE: BLK) and HPS Investment
Partners (“HPS”), a leading global credit investment manager with approximately $148
billion in client assets, have entered into a definitive agreement for BlackRock to
acquire HPS for approximately $12 billion, with 100% of consideration paid in
BlackRock equity. The equity is issued by a wholly-owned subsidiary of BlackRock
(“SubCo Units”), and exchangeable on a one-for-one basis into BlackRock common
stock.

The future of fixed income is building public and private portfolios to optimize liquidity,
yield, and diversification. This transaction will bring together BlackRock’s strong
corporate and asset owner relationships with HPS’s diversified origination and capital
flexibility. 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.

“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. We have always sought to position ourselves ahead
of our clients’ needs. Together with the scale, capabilities, and expertise of the HPS
team, BlackRock will deliver clients solutions that seamlessly blend public and private,”
said Laurence D. Fink, BlackRock Chairman and CEO.

Durable global growth will require higher volumes of debt financing and markets are
increasingly looking to private capital as an answer. The addition of HPS will position
BlackRock to connect companies of all sizes, from small and medium-sized businesses
to large corporations, with financing for investments that support economic growth
and job creation.

Market forces, technology, and regulation are consistently moving financial activity to
where it can be done most efficiently, making private credit a structural growth
segment. BlackRock expects the private debt market will more than double to $4.5
trillion by 2030. 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 and HPS will form a new private financing solutions business unit led by
Scott Kapnick, Scot French, and Michael Patterson. This combined platform will have
broad capabilities across senior and junior credit solutions, asset-based finance, real
estate, private placements, and CLOs. 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).
This combination creates an integrated solution for clients and borrowers across
corporate and asset-based finance, investment and non-investment grade and private
credit. As part of this transaction, Messrs. Kapnick, French, and Patterson will join
BlackRock’s Global Executive Committee and Mr. Kapnick will be an observer to the
BlackRock Board of Directors.

“Today marks an important milestone in our drive to become the world‘s leading
provider of private financing solutions. 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. My partners and I are
energized to work with Larry Fink and our new BlackRock colleagues,” said Scott
Kapnick, HPS CEO.

Founded in 2007, HPS is a leading global credit investment manager with capabilities
across the capital structure. HPS has continually demonstrated its ability to identify,
structure, and execute compelling investments, and its extensive investing expertise
coupled with the firm’s strong track record has fueled its growth into one of the largest
independent private credit platforms. HPS’s differentiated origination platform, which
spans non-sponsor and sponsor channels, underpinned by a scaled and flexible capital
base, offers companies a wide range of bespoke financing solutions. The firm continues
to be led by its founders and long-term Governing Partners Scott Kapnick, Michael
Patterson, Scot French, Purnima Puri, Faith Rosenfeld, Paul Knollmeyer, and Kathy
Choi.

Since BlackRock’s founding in 1988, the firm has grown its fixed income capabilities,
and now serves clients through a $3 trillion platform across Fundamental Fixed
Income, led by Rick Rieder, as well as Financial Institutions, Municipals, Systematic
Fixed Income, Index Fixed Income, and iShares bond ETFs. BlackRock manages nearly
$90 billion in private debt client assets across sponsor- and non-sponsor-led core
middle market direct lending in U.S., European, and Asian markets, venture lending,
investment grade private placements, and real estate debt, as well as dedicated private
infrastructure debt.

This transaction will deepen BlackRock’s capabilities for insurance clients. BlackRock is
a leading provider of solutions for insurers, which represent 100 Aladdin technology
clients and $700 billion in assets under management at BlackRock. HPS is a leading
independent provider of private credit for insurance clients. The addition of HPS will
position BlackRock to be a full-service, fiduciary provider of public-private asset
management and technology solutions for insurance clients.

Mr. Fink continued, “For over 35 years, BlackRock has grown and evolved alongside the
capital markets. With GIP, and now HPS, we are expanding our private markets
capabilities across our comprehensive global platform. Our Aladdin technology,
including eFront, and soon Preqin, will make access to private markets simpler and
more transparent. These capabilities, together with our global reach, deep
relationships, and powerful technology, differentiate our ability to serve clients.”

Terms of the Transaction

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.

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

Teleconference and Webcast Details

BlackRock will hold an investor call on Tuesday, December 3, 2024 at 8:00 a.m. ET to
discuss the transaction.

Members of the public who are interested in participating in the teleconference should
dial, from the United States, (313) 209-4906, or from outside the United States, (877)
502-9276, shortly before 8:00 a.m. ET and reference the BlackRock Conference Call (ID
Number 6786819). A live, listen-only webcast will also be available via the investor
relations section of www.blackrock.com.

The webcast will be available for replay by 11:00 a.m. ET on Tuesday, December 3,
2024. To access the replay of the webcast, please visit the investor relations section of
www.blackrock.com.

An investor presentation with additional details about the transaction is also available
on the “Events & Presentations” section of the investor relations website:
https://ir.blackrock.com/news-and-events/events-and-presentations/

About BlackRock

BlackRock’s purpose is to help more and more people experience financial well-being.
As a fiduciary to investors and a leading provider of financial technology, we help
millions of people build savings that serve them throughout their lives by making
investing easier and more affordable. For additional information on BlackRock, please
visit www.blackrock.com/corporate.

About HPS Investment Partners

HPS Investment Partners, LLC is a leading global, credit-focused alternative
investment firm that seeks to provide creative capital solutions and generate attractive
risk-adjusted returns for our clients. We manage various strategies across the capital
structure, including privately negotiated senior debt; privately negotiated junior capital
solutions in debt, preferred and equity formats; liquid credit including syndicated
leveraged loans, collateralized loan obligations and high yield bonds; asset-based
finance and real estate. The scale and breadth of our platform offers the flexibility to
invest in companies large and small, through standard or customized solutions. At our
core, we share a common thread of intellectual rigor and discipline that enables us to
create value for our clients, who have entrusted us with approximately $148 billion of
assets under management as of September 2024. For more information, please visit
www.hpspartners.com.

Contacts

BlackRock Media Relations
Patrick Scanlan
212-810-3622
[email protected]

BlackRock Investor Relations
Caroline Rodda
212-810-3442
[email protected]

HPS Investment Partners
Mike Geller / Josh Clarkson
646-818-9018 / 646-818-9259
[email protected] / [email protected]

Forward Looking Statements

This press release, and other statements that BlackRock may make, may contain
forward-looking statements within the meaning of the Private Securities Litigation
Reform Act, with respect to BlackRock’s future financial or business performance,
strategies or expectations, including the anticipated timing, consummation and
expected benefits of the proposed HPS Investment Partners (“HPS”) transaction and
HPS’s projected financial performance. Forward looking statements are typically
identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,”
“believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,”
“position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,”
“achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,”
“should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time and may contain
information that is not purely historical in nature. Such information may include,
among other things, projections and forecasts. There is no guarantee that any forecasts
made will come to pass. Forward-looking statements speak only as of the date they are
made, and BlackRock assumes no duty to and does not undertake to update forward looking statements. Actual results could differ materially from those anticipated in
forward-looking statements and future results could differ materially from historical
performance.

BlackRock has previously disclosed risk factors in its Securities and Exchange
Commission (“SEC”) reports. These risk factors and those identified elsewhere in this
press release, among others, could cause actual results to differ materially from
forward-looking statements or historical performance and include: (1) the introduction,
withdrawal, success and timing of business initiatives and strategies; (2) changes and
volatility in political, economic or industry conditions, the interest rate environment,
foreign exchange rates or financial and capital markets, which could result in changes
in demand for products or services or in the value of assets under management; (3) the
relative and absolute investment performance of BlackRock’s investment products; (4)
BlackRock’s ability to develop new products and services that address client
preferences; (5) the impact of increased competition; (6) the impact of recent or future
acquisitions or divestitures, including the acquisitions of HPS (the “HPS Transaction”),
Preqin (the “Preqin Transaction”) and Global Infrastructure Partners (together with the
HPS Transaction and the Preqin Transaction, the “Transactions”); (7) BlackRock’s
ability to integrate acquired businesses successfully, including the Transactions; (8)
risks related to the HPS Transaction and the Preqin Transaction, including delays in the
expected closing date of the HPS Transaction or the Preqin Transaction, the possibility
that either or both of the HPS Transaction or the Preqin Transaction does not close,
including, but not limited to, due to the failure to satisfy the closing conditions; the
possibility that expected synergies and value creation from the HPS Transaction or the
Preqin Transaction will not be realized, or will not be realized within the expected time
period; and the risk of impacts to business and operational relationships related to
disruptions from the HPS Transaction or the Preqin Transaction; (9) the unfavorable
resolution of legal proceedings; (10) the extent and timing of any share repurchases;
(11) the impact, extent and timing of technological changes and the adequacy of
intellectual property, data, information and cybersecurity protection; (12) the failure to
effectively manage the development and use of artificial intelligence; (13) attempts to
circumvent BlackRock’s operational control environment or the potential for human
error in connection with BlackRock’s operational systems; (14) the impact of legislative
and regulatory actions and reforms, regulatory, supervisory or enforcement actions of
government agencies and governmental scrutiny relating to BlackRock; (15) changes in
law and policy and uncertainty pending any such changes; (16) any failure to effectively
manage conflicts of interest; (17) damage to BlackRock’s reputation; (18) increasing
focus from stakeholders regarding ESG matters; (19) geopolitical unrest, terrorist
activities, civil or international hostilities, and other events outside BlackRock’s control,
including wars, natural disasters and health crises, which may adversely affect the
general economy, domestic and local financial and capital markets, specific industries
or BlackRock; (20) climate-related risks to BlackRock's business, products, operations
and clients; (21) the ability to attract, train and retain highly qualified and diverse
professionals; (22) fluctuations in the carrying value of BlackRock’s economic
investments; (23) the impact of changes to tax legislation, including income, payroll
and transaction taxes, and taxation on products, which could affect the value
proposition to clients and, generally, the tax position of BlackRock; (24) BlackRock’s
success in negotiating distribution arrangements and maintaining distribution
channels for its products; (25) the failure by key third-party providers of BlackRock to
fulfill their obligations to BlackRock; (26) operational, technological and regulatory
risks associated with BlackRock’s major technology partnerships; (27) any disruption to
the operations of third parties whose functions are integral to BlackRock’s exchange traded funds platform; (28) the impact of BlackRock electing to provide support to its
products from time to time and any potential liabilities related to securities lending or
other indemnification obligations; and (29) the impact of problems, instability or failure
of other financial institutions or the failure or negative performance of products offered
by other financial institutions. BlackRock’s Annual Report on Form 10–K, Quarterly
Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on
the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com,
discuss these factors in more detail and identify additional factors that can affect
forward–looking statements. The information contained on BlackRock’s website is not a
part of this press release, and therefore, is not incorporated herein by reference.

BlackRock reports its financial results in accordance with accounting principles
generally accepted in the United States (“GAAP”); however, management believes
BlackRock’s ongoing operating results may be enhanced if investors have additional
non–GAAP financial measures. Management reviews non-GAAP financial measures to
assess ongoing operations and considers them to be helpful, for both management
and investors, in evaluating BlackRock’s financial performance over time. Management
also uses non-GAAP financial measures as a benchmark to compare its performance
with other companies and to enhance the comparability of this information for the
reporting periods presented. Non-GAAP measures may pose limitations because they
do not include all of BlackRock’s revenue and expense. BlackRock’s management does
not advocate that investors consider such non-GAAP financial measures in isolation
from, or as a substitute for, financial information prepared in accordance with GAAP.
Non-GAAP measures may not be comparable to other similarly titled measures of other
companies���