The nerds of private credit

HPS confidentially files for IPO

A quick programming note: we’re excited to let you know that we’ll be ramping up our coverage to Mondays, Wednesdays, and Fridays going forward.

Along with more up-to-date stories, this also gives us the space to get you more news on international deals, portfolio company add-ons, and Seed through Series A rounds, all of which usually don’t make it into our current weekly note.

Be on the lookout for our next issue this Wednesday. With that out of the way, here’s what we’ve got today…

  • Two headline deals and a look at HPS Investment Partners’ confidential filing

  • The week’s deal sheet, plus a look at what’s happening in early-stage venture

1. Blackstone puts the leash on Rover.

Blackstone has agreed to acquire pet walking business Rover Group in an all-cash transaction valued at around $2.3 billion.

• The $11 per share offer represents a significant 61 percent premium over Rover's 90-day average, implying a healthy 30x 2024E Adj. EBITDA multiple. The deal is expected to close in the first quarter of 2024 and includes a 30-day "go-shop" provision expiring December 29th, though there may be limited interest at this price.

• It’s a rare example of a respectable de-SPAC outcome, following Rover’s $1.35 billion 2021 merger with True Wind Capital-backed Nebula Caravel Acquisition Corp. Though, despite shares up 130 percent year-to-date, Rover had continued to trade below its $10 SPAC merger price up until Blackstone’s approach.

• Rover is a bright spot in a pet industry challenged by changing post-pandemic consumer trends. Its 2023 guidance of 25 percent topline growth is meaningfully better than peers like PetCo, which tumbled this week after missing Q3 revenue and earnings estimates.

• Blackstone is picking up a clear market leader — Rover’s closest competitor Wag! trades at a market value under $100 million.

2. Cigna and Humana may test antitrust authorities.

Cigna Corp. and Humana Inc., two of the U.S.' largest health insurers, are in advanced talks over a merger that would create a combined entity valued at more than $140 billion.

• Both companies have hired advisers and have been in negotiations for more than a month, targeting a deal before year-end.

• It's not the first time Cigna and Humana have considered transformative deals. The pair had previously discussed a tie-up in 2015 but called off the combination in favor of other suitors. Humana came close to a merger with Aetna, though the deal was ultimately scrapped following antitrust litigation, as was a separate merger attempt between Cigna and Anthem.

• Cigna has historically had a strong commercial insurance business, and is one of the biggest players in pharmacy benefits following its $54 billion acquisition of Express Scripts. It’s fallen short, however, in its Medicare Advantage offering, which happens to be Humana’s strongsuit. Cigna has been separately exploring the sale of its MA unit, a move that could ease antitrust concerns and open up a clearer path for what would otherwise be an unlikely merger.


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The supposed ‘golden age of private credit’ continued last week with news that HPS Investment Partners had confidentially filed for an IPO.

HPS submitted its registration to the SEC more than a year ago, but had postponed its listing in response to equity capital markets softness. The firm is now revisiting those plans, hiring Goldman Sachs and JP Morgan to advise on a potential listing that could value HPS at more than $8 billion.

With assets under management of more than $100 billion, HPS is set to join publicly traded peers Ares Management Corp. and Blue Owl Capital Inc., both of which have enjoyed strong market performance this year.

Ares is up 64 percent year-to-date, and, with a longer public track record, boasts an industry-leading valuation. Blue Owl’s year has been somewhat choppier, though the firm is still up around 35 percent despite well-publicized recent management turmoil. Both report continued growth in both direct lending origination and fundraising.

HPS, however, thinks it has a competitive edge over Ares, Blue Owl, and the broader private credit competitive set. Its marketing materials point to deeper expertise in distressed situations, a willingness to enter into more esoteric deals, the capital to take down the largest opportunities, and the non-sponsor capability to open up exposure to a much less competitive corner of the market.

It’s an edge that even the competition acknowledges, at least according to HPS Managing Director Scot French: “Our competitors refer to us as the nerds of private credit, and we take no offense.”

The Founding Story

In 2007, a year before Lehman Brothers’ collapse, founder Scott Kapnick decamped from his former role as co-head of global investment banking at Goldman Sachs to build out a new strategy at JP Morgan: HPS (the acronym stands for Highbridge Principal Strategies) was launched as a division of Highbridge, JP Morgan Asset Management’s hedge fund business.

At Goldman, Kapnick had held a front-row seat to the rapid growth of the firm’s mezzanine strategy. One of private credit’s earliest iterations, the group invested outside capital, rather than invest off the firm’s own balance sheet.

Sensing a broader trend, Kapnick sought to replicate Goldman’s success elsewhere. At the time, JP Morgan had no presence in the space and reached an agreement with Kapnick that allowed him to build out a competing franchise under the Highbridge umbrella.

Moving Out

In the aftermath of the financial crisis, banks’ in-house investment units found themselves squarely in regulators’ crosshairs. While HPS’ approach was never expressly outlawed under the Volcker rule, which primarily concerned proprietary balance sheet trading, the activities nevertheless drew unwanted scrutiny.

Along with broader uncertainty for traditional financial institutions, HPS’ position within JP Morgan had become more precarious than expected. In an interview with Bloomberg, Kapnick recalls the changing relationship:

JPMorgan was going to provide us with capital and the possibility of deal flow, including allowing me to fund a young, talented team. All these conditions were matched, but then the crisis happened, and several of those conditions changed. It was difficult to see us growing as significantly.

Scott Kapnick, CEO of HPS Investment Partners

By 2016, Kapnick and his senior team reached an agreement to spin out their business from JP Morgan and its Highbridge unit. Putting up $100 million of their own cash, along with $300 million of debt financing from Bank of America, the management group bought out HPS in a deal that valued the firm at around $1 billion. JP Morgan retained a minority stake, which it’s since sold down to Dyal Capital and Guardian Life.

Checking In on the Golden Age

Near-daily golden age proclamations give the impression that we may be nearing peak private credit. But, rather than try to temper sentiment, Kapnick is in full agreement. “You’re seeing the rebuilding of Western capital markets beyond the banking system,” the HPS CEO told Bloomberg.

Direct lending transactions ($ billions), per DLD

HPS points to a set of market conditions that, along with a general maturation of the asset class, provide a unique set of potential tailwinds:

  • Reduced bank lending hands direct lenders an opening to continue to take share. At the same time, private credit’s speed and certainty of execution can often be more important in deals than even pricing.

  • Wider credit spreads and higher base rates should offer relatively greater returns over the near term, particularly attractive to limited partners accustomed to a decade of bottomed-out interest rates.

  • An upcoming 2024 maturity wall with today’s higher rate environment means refinancings will be more complex than they have been historically. That’s a benefit to direct lenders who can offer borrowers the flexibility to structure more unique financings. “[Borrowers] need to find some solution to get their capital structures amended and extended. They’ll possibly need common equity or a more bespoke piece that a firm such as HPS can offer,” says French.

Private credit’s ascendancy may not continue unchecked, however. Attempting to offset the loss of meaningful leveraged loan fees, banks have begun launching their own private credit strategies.

Earlier this month, Nomura announced a $1 billion direct lending fund, which was followed up by news that Citigroup is planning to launch its own offering by January 2024, potentially in partnership with another firm to provide outside capital for Citi-originated deals. Wells Fargo, Barclays, and Société Générale have all made similar moves this year.

A flurry of bank activity, but still a drop in the bucket compared to what Preqin pegs at a $1.6 trillion private credit market, led by established lenders like the aforementioned HPS, Ares, and Blue Owl trio, along with the private credit arms of firms like Blackstone, Apollo, and KKR.

However, banks aren’t the only group trying to barge their way into the market. Traditional asset managers have completed a number of recent deals in the space as they try to secure a foothold of their own — at least 26 asset managers have bought or launched new private credit units in the past two years.

Highlights include T. Rowe Price’s $4.2 billion deal for Oak Hill, Man Group’s purchase of a majority stake in Varagon Capital, and BlackRock’s acquisition of Kreos Capital.

The jump in activity and fundraising has led to increasing concern over just how much dry powder is stacking up within private credit. The growing volume of lenders, including traditional bank-led leveraged loan offerings, could simply compete away the excess risk-adjusted returns HPS and its peers are counting on.

In a downside scenario, managers who must put capital to work within a defined fund lifecycle will chase lower-quality deals with lighter documentation, leaving them exposed should borrower defaults tick up.

There’s also likely more capital on the way — more than 63 percent of allocators indicate they intend to increase their private credit exposure from current levels, per a Wolfe Research survey.

But, absent a major credit event, the party may just continue for a while longer, particularly with what many hope is a meaningful uptick in M&A activity heading into 2024. At the very least, HPS should receive a warm welcome from prospective shareholders.


AbbVie (NYSE: ABBV) has agreed to acquire ImmunoGen (Nasdaq: IMGN), a Waltham, MA-based antibody-drug conjugate biotech, for $10.1 billion in cash.

BPCE is considering strategic options for its Natixis Investment Managers unit, including a potential sale of either a majority or minority stake in the $1.2 trillion AUM business.

Hahn & Co. is considering an exit of SK Shipping, an owner and operator of LNG carriers that could be valued at around $10 billion.

Advent International, Blackstone, CVC Capital Partners, and EQT are all reportedly bidding for a minority stake in the media rights of the German Football League, which could be worth up to €1 billion ($1.1 billion).

General Atlantic and Hg are considering the sale of their stakes in Argus Media, an oil and commodities data firm, and have received interest from potential investors CDPQ, GIC, and Mubadala.

EagleTree Capital has agreed to acquire the flavor and ingredient developer Summit Hill Foods.

Madison Dearborn Partners acquired T2S Solutions, a provider of engineering and intelligence products and services to government agencies.

Occidental Petroleum (NYSE: OXY) is in talks to buy CrownRock, an Austin-based energy business owned by Lime Rock Partners, for more than $10 billion.

Onex hired Bank of America to lead a sale process for healthcare staffing firm Acacium Group that could be worth around $1.5 billion.

Permira is moving forward with the sale of a minority stake in fund administration company Alter Domus, targeting a valuation of more than €4 billion.

The Adelson family is buying a majority stake in the NBA's Dallas Mavericks from Mark Cuban.

• State-owned Gabon Oil Co. now plans to exercise its right of first refusal to acquire Carlyle-backed Assala Energy, which had previously reached an agreement with Maurel & Prom (Paris: MAU) for a $1.3 billion exit.

Ardian and Saudi Arabia's Public Investment Fund agreed to pay £2.37 billion ($3.01 billion) for a 25% stake in Heathrow Airport held by Spanish infrastructure giant Ferrovial.

KKR has agreed to buy the remaining 37 percent stake it doesn’t already own in Global Atlantic Financial Group for $2.7 billion.

Rocket Software, backed by Bain Capital, has agreed to acquire the Application Modernization and Connectivity business of OpenText (NASDAQ: OTEX) for $2.27 billion.

Digital 9 Infrastructure (AIM: DGI9) agreed to sell its entire stake in Verne Global, an Iceland-based data center solutions provider, to Ardian for up to $575 million.

EQT has acquired a majority stake in HRBrain, a Japanese human resource management software firm.

Norwest Equity Partners acquired United Sports Brands, a provider of sports performance and protective products, from Bregal Partners.

TJC acquired Global Transport Solutions, a provider of logistics services for the maritime industry.

TJC agreed to acquire the commercial aviation solutions business of L3Harris (NYSE: LHX) for $700 million upfront, plus a $100 million earnout.

Castlelake Partners, a Minneapolis-based private equity firm, is evaluating strategic options that may include a sale of the $22 billion AUM firm.

Elliott Management has taken a $2 billion stake in wireless tower operator Crown Castle and is preparing a proxy fight.

BT Group and Aurelius Group have abandoned takeover talks with technology trade-in platform MusicMagpie.

Vista Equity Partners agreed to acquire EngageSmart, a provider of software solutions for managing customer engagement and payment systems, from Insight Partners for $4 billion.

KKR acquired Potter Global Technologies, a provider of life safety and emergency comm system services, from Gryphon Investors.

Boehringer Ingelheim has agreed to acquire T3 Pharmaceuticals, a Swiss biotech focused on bacterially delivered cancer therapies, for $508 million.

John Bean Technologies (NYSE: JBT) approached Iceland-based food processing company Marel (Reykjavík: MARL) with a €2.4 billion takeover offer.

Taisho Pharmaceutical received a management buyout offer from a group led by its deputy president, Shigeru Uehara, valuing the company at around $4.8 billion.

Yieldstreet has agreed to acquire Cadre, a real estate investing platform.


Shein, the fast-fashion group, confidentially filed for its U.S. IPO.

Lineage Logistics, a cold storage facility real estate investment trust, is targeting a $30 billion valuation in a planned 2024 IPO.

Panera Bread, the fast-casual sandwich chain owned by JAB Holding, has confidentially filed for an IPO.


Alpheya, an Abu Dhabi-based wealthtech platform, raised $300 million in new funding from BNY Mellon and Lunate.

Wormhole, a blockchain protocol designed to facilitate cross-chain communication, raised $225 million at a $2.5 billion valuation from Brevan Howard, Coinbase Ventures, Multicoin Capital, ParaFi, Dialectic, Borderless Capital, Arrington Capital and Jump Trading.

Castore, an athletics and sportswear e-commerce brand, raised £150 million in growth funding from Raine Group, Felix Capital, and Hanaco Ventures.

BlueVoyant, a cybersecurity services firm, raised $140 million in Series E funding. Liberty Strategic Capital and Istari co-led, with participation from Eden Global Capital Partners.

Ursa Major, a developer of advanced rocket propulsion systems, raised $138 million in Series D and D-1 funding co-led by Explorer 1 Fund and Eclipse, with participation from RTX Ventures, BlackRock, Exor Ventures, Mack & Co. and XN.

ZeroAvia, an aviation technology company focused on hydrogen-electric engines for commercial flights, raised $116 million in Series C funding led by the UK Infrastructure Bank, with participation from Airbus, Barclays Sustainable Impact Capital, NEOM Investment Fund, Breakthrough Energy Ventures, Horizons Ventures, Alaska Airlines, Summa Equity, AP Ventures, and Amazon Climate Pledge Fund.

Together, a generative AI training platform, raised $102.5 million in Series A funding led by Kleiner Perkins, with participation from Nvidia and Emergence Capital Partners.

Oxford Quantum Circuits, a developer of quantum processors and computing platforms, raised $100 million in Series B funding led by SBI Investment, with participation from Oxford Science Enterprises, UTEC, Lansdowne Partners, and OTIF.

Mylight150, a French provider of solar energy management systems, raised €100 million from Azora, Eiffel Investment Group, and Andera Partners.

Braincube, a SaaS manufacturing intelligence firm, raised €83 million ($90.9 million) in equity funding. Scottish Equity Partners and Bpifrance co-led.

Paysend, a UK-based global payments platform, raised $65 million in new funding from Mastercard, InfraVia, One Peak, and Hermes GPE.

Pika Labs, a developer of AI-powered video generation tools, raised $55 million in seed and Series A funding from Lightspeed Venture Partners, with participation from Homebrew, Conviction Capital, SV Angel, Ben's Bites, Adam D'Angelo, Nat Friedman, and Alex Chung.

RepeatMD, a developer of health clinic patient loyalty solutions, raised $50 million in Series A funding from Centana and Full In.

Candex, a provider of vendor management and tail spend solutions, raised $45 million in Series B funding from Goldman Sachs and World Innovation Lab, with participation from Altos, NFX, Craft, JP Morgan, American Express, and Edenred.

One Click LCA, a developer of lifecycle assessment and sustainability management software for the construction industry, raised €40 million ($43.8 million) in funding. PSG Equity and InfraVia Capital Partners co-led.

Aro Biotherapeutics, a biotech developing protein-based therapies for genetic diseases, raised $41.5 million in Series B funding. Cowen Healthcare Investments led, with participation from Johnson & Johnson Innovation, Northpond Ventures, HealthCap, and BVF Partners.

Second Front Systems, a provider of project management software for government clients, raised $40 million in Series B funding led by NEA, with participation from Moore Strategic Ventures and AE Industrial Partners’ HorizonX.

Stensul, a marketing creation platform, raised $34.5 million in Series C funding led by Sageview Capital, with participation from Sageview Capital, USVP, Javelin, Uncork, Lowercase, and Edith Harbaugh.

DuploCloud, a DevOps automation platform, raised $32 million in Series B funding from WestBridge Capital, StepStone Group, and existing backer Mayfield.

PhysicsX, a physics simulation and modeling platform, raised $32 million in Series A funding. General Catalyst led, with participation from Standard Industries, NGP Energy, Radius Capital, and Henry Kravis.

Kognitos, a developer of RPA and AI-powered enterprise software, raised $20 million in Series A funding led by Khosla Ventures, with participation from Clear Ventures, Engineering Capital, and Wipro Ventures.


Lindsay Goldberg is raising its sixth buyout fund.

Pantheon raised $3.25 billion for its seventh private equity secondaries fund.

Blackstone raised $2.6 billion for an eighth real estate secondaries fund.

Antin Infrastructure Partners raised €1.2 billion for a sustainable infrastructure fund.

Star Mountain Capital raised $1.2 billion for its fourth direct lending fund.

Tower Arch Capital raised $750 million for its third fund.

New Heritage Capital raised $438 million for its fourth lower middle market buyout fund.

Wave Equity Partners is raising $400 million for its third fund.

Tola Capital raised $230 million for its third venture fund.

Oxx raised $190 million for its second venture fund.

Twelve Below raised $108 million for new early-stage funds.


1. An early-stage status update.

• Slow Ventures’ Sam Lessin drops his Fall 2023 in-depth look at the state of venture capital. — WTF VC, Sam Lessin

2. The latest on listed managers.

• Pitchbook released its Q3 update on US-based public alternative asset managers, covering the latest developments at Blackstone, KKR, Apollo, Blue Owl, Carlyle, Ares, and TPG. — US Public PE and GP Deal Roundup, Pitchbook


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