BlackRock has deal to buy private capital manager HPS

BlackRock has a handshake deal to buy HPS resource Partners, as the globe’s largest resource manager looks to bolster its alternative resource business with the addition of one of the biggest private capital groups on Wall Street.

The two sides have agreed on the broad outline of the deal with an eye towards announcing general terms after the Thanksgiving holiday, according to four people with knowledge of the matter.

HPS, which was founded less than two decades ago by Goldman Sachs’ former head of resource banking Scott Kapnick, had previously this year been working towards an initial IPO that would have valued the business at about $10bn. A sale could propose a significant additional expense over that worth. Two sources said the final worth would be closer to $12bn than $10bn.

While it is feasible that the deal could fall through, BlackRock prides itself on being able to propose near certainty to its buyout partners.

A deal would mark the latest expansionary shift by BlackRock, which has $11.5tn in assets under management and has been on a large buyout spree. Founder Larry Fink has set his sights on bolstering its footprint in the rapidly growing alternative assets business, which carries much higher fees than the exchanged-traded funds that powered its previous growth.

Last month BlackRock completed a $12.5bn buyout of infrastructure resource firm Global Infrastructure Partners. It also agreed in July to purchase Preqin, a UK private markets data throng, for £2.55bn in liquid assets.

BlackRock is also in talks with Millennium Management about a tie-up that could view the resource manager buy a minority stake in Izzy Englander’s $69.5bn multi-schedule protect portfolio manager.

HPS has become a behemoth in the private capital industry since its founding as a JPMorgan Chase unit in 2007, managing nearly $150bn at the complete of September. It was an early and prolific investor in the space, and has benefited as traditional banks retrenched from some of their core lending franchises as post-crisis regulations damped their returns or pushed them out of businesses altogether.

The private capital firm is one of the most sought after money managers in the private resource industry. It is one of the few privately held private capital managers of its size able to shift the needle for an acquirer such as BlackRock, which is keen to catapult ahead in the burgeoning resource class as competitors like Ares, Apollo and Blackstone receive trade distribute.

HPS did not respond to a request for comment. BlackRock declined to comment. It has $450bn in alternative assets under management, now that the GIP deal has closed.

Additional reporting by James Fontanella-Khan and Antoine Gara