09:08 AM EST, 12/03/2024 (MT Newswires) -- BlackRock ( BLK ) on Tuesday agreed to acquire credit investment manager HPS Investment Partners in an all-stock deal worth roughly $12 billion to create an integrated private credit franchise with about $220 billion in client assets.

BlackRock ( BLK ) will pay 100% of the transaction's consideration in company equity. The equity will be issued by a subsidiary of the asset manager and be exchangeable on a one-for-one basis into BlackRock ( BLK ) stock.

Under the terms of the deal, BlackRock ( BLK ) will pay about 9.2 million equity units at the deal's completion and roughly 2.9 million units in about five years, depending on certain closing conditions. The asset manager could pay up to an additional 1.6 million units based on financial performance milestones in five years. Up to $675 million of the total deal consideration will be used to fund an equity retention pool for HPS employees.

The deal, which requires approval from regulators, is expected to be completed in the middle of next year, the companies said in a joint statement. As part of the transaction's completion, BlackRock ( BLK ) expects to retire for cash, or refinance, about $400 million of current HPS debt.

"Together with the scale, capabilities and expertise of the HPS team, BlackRock ( BLK ) will deliver clients solutions that seamlessly blend public and private," BlackRock ( BLK ) Chief Executive Laurence Fink said in the statement.

BlackRock ( BLK ) and HPS plan to establish a new private financing solutions business unit, which will have broad capabilities across senior and junior credit solutions, asset-based finance, real estate, private placements and collateralized loan obligations. The division will be led by HPS CEO Scott Kapnick and its governing partners, Scot French and Michael Patterson.

"Our partnership with BlackRock ( BLK ) will further strengthen our position in this fast growing but increasingly competitive market," according to Kapnick. "The combination of HPS's proven culture of investment discipline with BlackRock's ( BLK ) 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."

The deal is expected to increase private markets fee-paying assets under management by 40% and management fees by about 35%, the companies said. BlackRock ( BLK ) expects the transaction to be modestly accretive to its per-share adjusted earnings in the first full year after completion.