To Boost Growth in Retail, T. Rowe Price Buys Oak Hill Advisors

Posted on 10/28/2021


T. Rowe Price Group, Inc. (NASDAQ-GS: TROW) signed a definitive agreement to purchase Oak Hill Advisors, L.P., an alternative credit manager. Under the terms of the transaction, T. Rowe Price will acquire 100% of the equity of Oak Hill Advisors and certain other entities that have common ownership for a purchase price of up to approximately US$ 4.2 billion, with US$ 3.3 billion payable at closing, approximately 74% in cash and 26% in T. Rowe Price common stock, and up to an additional US$ 900 million in cash upon the achievement of certain business milestones beginning in 2025. The purchase price includes the retirement of Oak Hill debt outstanding at closing. Excluding amortization of intangibles and the expense impact of the earnout, the transaction is expected to be accretive to T. Rowe Price diluted earnings per share by a low-to-mid single digit percentage in 2022.

PIFSS
The deal gives an exit for investors such as Wafra, which is owned by the Kuwait’s Public Institution for Social Security (PIFSS). Wafra owns the stake via Wafra Strategic Investors II Ltd., which got ownership in February 2018. Wafra owned between a 25% to 50% stake in Oak Hill, while Oak Hill Advisors Genpar, L.P. own between 50% and 75% of the firm. Oak Hill Advisors Genpar is owned by Glenn August and William Bohnsack (back in August 1999).

Oak Hill will become T. Rowe Price’s private markets platform, accelerating T. Rowe Price’s expansion into alternative investment markets and complementing T. Rowe Price’s existing global platform and ongoing strategic investments in its core investments and distribution capabilities. Alternative credit strategies continue to be in demand from institutional and retail investors across the globe seeking attractive yields and risk-adjusted returns. With US$ 53 billion of capital under management as of July 31, 2021, across its private, distressed, special situations, liquid, structured credit, and real asset strategies and more than 300 employees in its global offices, Oak Hill has a global institutional client base.

In addition, they plan to co-develop new products and strategies for T. Rowe Price’s wealth and retail channels, including its broker-dealer, bank, RIA, and platform businesses. T. Rowe Price has agreed to commit US$ 500 million for co-investment and seed capital alongside OHA management and investors.

Bill Stromberg, chair of T. Rowe Price’s Board of Directors and chief executive officer, stated in a press release, “While we are committed to our long-term strategy to grow our business organically, we have also taken a deliberate and thoughtful approach to considering adding new capabilities through acquisitions that advance our business strategy. OHA meets the high bar we have set for inorganic opportunities, and their proven private credit expertise will help us meet our clients’ demand for alternative credit.”

Business as Usual for Now
For the time being, Oak Hill will operate as a standalone business within T. Rowe Price; have autonomy over its investment process; and maintain its team, culture, and investment approach. August will continue in his current role and is expected to join T. Rowe Price’s Board of Directors and Management Committee following closing. Alongside August, all members of OHA’s partner management team will sign long-term agreements and continue to lead the business in their current roles. The transaction has been unanimously approved by the T. Rowe Price Board of Directors and the partners of Oak Hill and is expected to close late in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including the receipt of regulatory clearances and approvals and client consents.

Advisors
Evercore served as financial advisor and Dechert LLP served as legal counsel to T. Rowe Price.

J.P. Morgan Securities LLC and M. Klein & Company served as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to OHA.

2011
In October 2011, Oak Hill Advisors had an investor group composed of General Atlantic LLC, Robert M. Bass, and senior management made an investment in Oak Hill Advisors and purchased the minority stake held by iStar Financial, Inc. The transaction increases the management team’s majority interest in Oak Hill Advisors. Bass co-founded Oak Hill Advisors’ first investment fund and has maintained a strategic relationship with the firm since its formation.

In February 2018, General Atlantic sold its 25% stake in Oak Hill to Wafra.

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