T Rowe Price to expand into alternative investments with $4.2 billion Oak Hill deal

FILE PHOTO: The logo of T. Rowe Price Group is pictured at its office in Tokyo, Japan, January 13, 2017. REUTERS/Toru Hanai

(Reuters) -Asset management firm T Rowe Price on Thursday agreed to buy fund manager Oak Hill Advisors in a $4.2 billion deal as it looks to expand its footprint in the alternative investments market.

The cash-and-stock deal could trigger more M&A activity in the asset management space, which has already seen a flurry of deal activity this year, with potential tie-ups between other mutual fund managers and private equity firms.

To cater to growing investor demand, asset management companies have seen a wave of consolidation in 2021, and the trend is expected to continue for the rest of the year, according to a report here from accounting and consulting firm PwC.

Some of the high-profile transactions from the sector announced this year include Wells Fargo & Co’s $2.1 billion deal to sell its asset management business to private equity firms GTCR LLC and Reverence Capital Partners, and Ares Management Corp’s $1.1 billion acquisition of Landmark Partners.

As of July end, New York-based OHA manages $53 billion of capital across its asset classes. Since January last year, it has raised $19.4 billion of capital.

T Rowe, which offers a suite of mutual funds, account management and other advisory services, manages $1.61 trillion in assets as of Sept. 30.

The Oak Hill deal will be financed through 74% of cash and the rest in T Rowe’s common stock. The company will pay an additional $900 million if certain business milestones are achieved in the beginning of 2025, it said.

Evercore was the financial adviser to T Rowe Price, while J.P. Morgan Securities and M. Klein & Company advised OHA.

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