Private equity giant Blackstone Group LP is acquiring alternative asset manager, GSO Capital Partners LP.

GSO specializes in the leveraged finance marketplace, with approximately US$10 billion under management. It manages a multi-strategy credit hedge fund, a mezzanine fund, a senior debt fund and various CLO vehicles.

The acquisition of GSO will augment Blackstone’s global alternative investment platform in the credit area, adding several new lines of business and creating significant synergies and opportunities for the firm, it said. The deal will also give GSO the opportunity to enhance its investment platform by harnessing the competitive strengths and deal flow provided by Blackstone’s franchise.

Both firm’s are based in New York City.

The acquisition is subject to execution of a definitive purchase agreement and satisfaction of closing conditions and is expected to close later in the first quarter. The purchase price to be paid by Blackstone will consist of cash and Blackstone Holdings units currently valued at US$620 million at closing, plus up to US$310 million to be paid over the next five years contingent upon the realization of specified earnings targets over that period. In addition, compensatory payments may be paid based on vesting and performance. Blackstone expects this transaction to be non-dilutive.

Stephen Schwarzman, chairman and CEO of Blackstone, said, “The combination of GSO’s businesses with our existing corporate debt operations will produce one of the largest credit platforms in the alternative asset management business, with over US$21 billion of total assets under management. Given the current dislocation in the credit markets, this is an ideal time to create a more powerful, diversified platform from which to grow Blackstone’s business.”

Blackstone also announced the planned repurchase of up to US$500 million of Blackstone common units and Blackstone Holdings units.