T Rowe Price Group is to acquire alternative credit manager purchase Oak Hill Advisors and certain other entities that have common ownership for a purchase price of up to approximately USD4.2 billion.
USD3.3 billion is payable at closing, approximately 74 per cent in cash and 26 per cent in T Rowe Price common stock, and up to an additional USD900 million in cash upon the achievement of certain business milestones beginning in 2025.
The purchase price includes the retirement of OHA debt outstanding at closing. Excluding amortisation of intangibles and the expense impact of the earn-out, 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.
OHA, a leading alternative credit manager, 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 USD53 billion of capital under management as of 31 July, 2021, across its private, distressed, special situations, liquid, structured credit, and real asset strategies and more than 300 employees in its global offices, OHA has generated attractive risk-adjusted returns over its more than 30-year history. OHA’s performance, its global institutional client base, and the positive industry backdrop have positioned it to raise USD19.4 billion of capital since January 2020.
Bill Stromberg, chair of T. Rowe Price’s Board of Directors and chief executive officer, says: “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.”
Rob Sharps, T Rowe Price president, head of Investments, and group chief investment officer, adds: “OHA and T Rowe Price share organisational cultures that focus on long-term investment excellence and delivering value for clients and that are grounded in collaboration, trust, and integrity. As we bring together complementary capabilities and distribution, we can capitalise on growth opportunities for new product development that add value for our clients and stockholders. We share a vision with OHA’s seasoned management team to build a broader business in private markets by combining their specialty in alternative credit with our global scale.”
