Global investment management firm T. Rowe Price Group, Inc. (NASDAQ: TROW) has concluded the acquisition (announced this October) of Oak Hill Advisors (OHA), an alternative credit manager.
With this acquisition, T. Rowe Price will expand more widely into alternative credit markets. Additionally, the deal will complement the company’s existing global platform and ongoing strategic investments in core investments and distribution capabilities, the company said.
Background
In October, T. Rowe Price inked a cash-and-stock deal valued at $4.2 billion to acquire Oak Hill Advisors. Per the terms of the deal, T. Rowe Price agreed to pay $3.3 billion to OHA, comprising 74% in cash and 26% in T. Rowe Price common stock. Furthermore, the company will pay an additional $900 million in cash as milestone payments starting in 2025.
With the closing of the transaction, Oak Hill Advisors will operate as a standalone entity within T. Rowe Price, while maintaining its team and culture. Glenn August, the CEO of OHA will continue in his current role and will join T. Rowe Price’s Board and Management Committee, effective December 30, 2021.
CEO Comments
President of T. Rowe Price, Rob Sharps, said, “We are very pleased to reach today’s milestone and to welcome the talented OHA team to T. Rowe Price. This acquisition allows us to broaden our private markets business and add new capabilities in an area of tremendous client interest and growth.”
Analyst Recommendations
On December 17, Deutsche Bank analyst Brian Bedell maintained a Hold rating on the stock and decreased the price target to $212 (7.32% upside potential) from $217.
Overall, the stock has a Hold consensus rating based on 2 Buys, 4 Holds, and 2 Sells. The average T. Rowe Price stock forecast of $216.56 implies 9.63% upside potential from current levels. Shares have gained 35.5% over the past year.
Risk Analysis
According to the new TipRanks Risk Factors tool, T. Rowe Price stock is at risk mainly from three factors: Finance and Corporate, Legal and Regulatory, and Macro & Political, which contribute 32%, 20%, and 16%, respectively, to the total 25 risks identified for the stock.
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