The Blackstone Group has agreed in principle to acquire GSO Capital Partners, an alternative asset manager specialising in the leveraged finance marketplace with approximately USD10bn under management. GSO manages a multistrategy credit hedge fund, a mezzanine fund, a senior debt fund and various collateralised loan obligation vehicles.
Blackstone says the acquisition of GSO is designed to boost its alternative investment platform in the credit area, adding several new lines of business and creating significant synergies and opportunities, while enhancing GSO's investment platform by harnessing the competitive strengths and deal flow provided by Blackstone's private equity franchise.
'The combination of GSO's businesses with our existing corporate debt operations will produce one of the largest credit platforms in the alternative asset management business, with more than USD21bn of total assets under management,' says Blackstone chairman and chief executive Stephen A. Schwarzman. 'Given the current dislocation in the credit markets, this is an ideal time to create a more powerful, diversified platform from which to grow Blackstone's business.'
Founded by Bennett Goodman, Doug Ostrover and Tripp Smith, GSO has some 120 professionals worldwide and offices in New York, London, Los Angeles and Houston. The three GSO founders will manage the combined businesses and Goodman will join Blackstone's executive committee.
'We believe that Blackstone's significant international presence, intellectual capital and transaction flow will meaningfully enhance our ability to generate attractive returns for our investors,' Goodman says. 'As part of Blackstone, we look forward to leveraging its strengths, building broader global scale for our businesses and most importantly, delivering outstanding investment performance.'
Hamilton E. James, president and chief operating officer of Blackstone, adds: 'I have a long history with many of the GSO principals. They bring superb market knowledge, depth of talent and experience to an outstanding team in place here at Blackstone. By accessing our considerable private equity and other resources, we expect this group to generate substantial incremental value for the limited partners of both firms' credit funds as well as for Blackstone's common unitholders.'
The acquisition is subject to a definitive purchase agreement and is expected to close later in the first quarter. The purchase price will consist of cash and Blackstone stock currently valued at a total of USD620m to be paid at closing, plus up to USD310m over the next five years subject to the achievement of earnings targets.
Blackstone has also announced that the board of its general partner, Blackstone Group Management, has authorised the repurchase of up to USD500m of Blackstone common units and Blackstone Holdings units in open market transactions or privately negotiated transactions.
Blackstone says its current intention is to seek to repurchase at least enough units to offset the issuance of units as part of the consideration in the GSO acquisition. 'We believe our common units are undervalued,' James says, 'and we therefore intend to offset the issuance of Holdings units to the owners of GSO by repurchasing the same amount from existing holders.' Blackstone's stock has fallen in value by more than 40 per cent since its IPO last June.
The Blackstone Group is one of the largest independent alternative asset managers in the world with businesses include the management of corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt funds, proprietary hedge funds and closed-end mutual funds, as well as financial advisory services including mergers and acquisitions advisory, restructuring and reorganisation advisory and fund placement services.