BlackRock Inc., the world’s largest money manager, has announced its ambitious acquisition of Global Infrastructure Partners (GIP) for a staggering $12.5 billion, per Bloomberg.
The deal involves a substantial $3 billion in cash and approximately 12 million shares, valued at around $9.5 billion based on Thursday’s closing prices. This landmark acquisition is poised to reshape the financial industry, marking BlackRock’s most significant deal since the acquisition of Barclays Global Investors in 2009.
The GIP acquisition aligns seamlessly with the vision of BlackRock’s CEO, Larry Fink, who aims to position the firm as a major player in the swiftly expanding market for private and alternative assets. With this move, BlackRock is set to enter the top echelons of investors specializing in long-term bets on energy, transportation, and digital infrastructure.
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The third-quarter closure of the deal will see 70 year-old Adebayo Ogunlesi, GIP’s esteemed Chairman and CEO and a former executive at Credit Suisse, joining BlackRock’s board and global executive committee. Ogunlesi, currently serving as Goldman Sachs Group Inc.’s lead director, brings a wealth of experience and strategic insight to BlackRock’s leadership.
Ogunlesi founded the firm in 2006 with support from General Electric Co. and Credit Suisse. The portfolio companies associated with Ogunlesi’s firm boast a collective annual revenue surpassing $80 billion, as indicated on its website.
The market response to the announcement was reflected in a slight dip in BlackRock’s shares during early New York trading. However, both Fink and BlackRock President Rob Kapito expressed confidence in the strategic importance of the acquisition. In a memo to employees, they emphasized the unprecedented need for new infrastructure in digital development, logistics enhancement, and efforts toward decarbonization and energy security.
“The unprecedented need for new infrastructure – for digital infrastructure, for upgraded logistics hubs, and for decarbonization and energy security – coupled with record high government deficits means that private capital will be needed like never before. This will be one of the fastest-growing areas of our industry over the next 10 years,” stated Fink and Kapito.
This acquisition marks a pivotal shift for BlackRock, moving away from its traditional focus on index-based investing toward becoming a major player in illiquid funds supporting complex and substantial projects. BlackRock’s assets in illiquid alternatives have shown an impressive 65% increase over the three years leading up to September 2023.
Combining GIP’s extensive $100 billion in assets with BlackRock’s existing infrastructure assets of approximately $50 billion will create a formidable unit, rivaling industry giants like Macquarie Asset Management and Brookfield Asset Management. BlackRock’s involvement in substantial infrastructure investments worldwide, including pipelines in the Middle East, a carbon-capture project in Texas, and a fiber network venture with AT&T Inc., further solidifies its position in this space.
While alternatives currently constitute around 3% of BlackRock’s assets under management, they contribute a significant 10% of the firm’s fees. BlackRock is strategically positioning itself as a comprehensive solution for a broad range of investment options, responding to the growing demand for alternative assets from institutional clients such as pensions, endowments, and sovereign wealth funds.
The infrastructure investments sector has become increasingly lucrative, with McKinsey projecting a substantial $15 trillion spending gap on global infrastructure through the end of the decade. Despite recent declines in other private investment products, infrastructure investments have demonstrated resilience, experiencing increased fundraising in 2022 while private equity and real estate faced setbacks.
Global Infrastructure Partners (GIP), a prominent player in the infrastructure investment space, holds stakes in some of the busiest airports globally, including London’s Gatwick. The firm’s diversified portfolio contributes to a combined annual revenue surpassing $80 billion. In 2019, GIP set a then-record by raising an impressive $22 billion for its flagship fund, Global Infrastructure Partners IV, and is actively raising a fifth fund.
As part of the acquisition, five of GIP’s founding partners will join BlackRock, bringing valuable expertise and industry knowledge. Approximately 30% of the shares involved in the deal will be deferred for about five years. To cover the cash portion of the acquisition, BlackRock has disclosed plans to issue debt. The completion of the deal was advised by Perella Weinberg Partners for BlackRock, with Evercore Inc. serving as the lead adviser for GIP.
The success of this acquisition could mark a new era for BlackRock and set the tone for the financial industry’s future ventures into alternative and private asset investments.