T. Rowe Price to buy Oak Hill Advisors for up to $4.2B

T. Rowe Price Group Inc. agreed to buy alternative credit manager Oak Hill Advisors LP.

Under the deal, T. Rowe Price will acquire 100% of the equity of Oak Hill and certain other entities that have common ownership for up to about $4.2 billion, with $3.3 billion payable at closing, approximately 74% in cash and 26% in T. Rowe Price common stock, and up to an additional $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's diluted EPS by a low-to-mid single digit percentage in 2022.

The transaction is expected to close late in the fourth quarter.

Oak Hill, which has $53 billion of capital under management as of July 31 and more than 300 employees in its global offices, will become T. Rowe Price's private markets platform, according to a news release. Oak Hill will operate as a stand-alone business within T. Rowe Price; have autonomy over its investment process; and maintain its team, culture, and investment approach.

The companies plan to co-develop new products and strategies for T. Rowe Price's wealth and retail channels, including its broker/dealer, bank, registered investment adviser, and platform businesses. T. Rowe Price has agreed to commit $500 million for co-investment and seed capital alongside Oak Hill management and investors. Over time, both firms intend to explore opportunities to expand into other alternative asset categories.

Oak Hill founder and CEO Glenn August will continue in his current role and is expected to join T. Rowe Price's board and management committee following closing. All members of Oak Hill's partner management team will sign long-term agreements and continue to lead the business in their current roles.

Evercore served as financial adviser, and Dechert LLP served as legal counsel, to T. Rowe Price. J.P. Morgan Securities LLC and M. Klein & Co. served as financial advisers, and Paul Weiss Rifkind Wharton & Garrison LLP served as legal counsel, to Oak Hill.