BlackRock Acquires Global Infrastructure Partners for $12.5 Billion, Hits $10 Trillion In Assets

BlackRock Inc., the world’s largest money manager, has agreed to acquire Adebayo Ogunlesi’s Global Infrastructure Partners (GIP) for approximately $12.5 billion. The deal, comprising $3 billion in cash and around 12 million shares, is expected to close in the third quarter of this year, subject to regulatory approvals.

This acquisition, the largest for BlackRock in over a decade, reflects CEO Larry Fink’s ambitious vision to position the firm as a key player in long-term investments in energy, transportation, and digital infrastructure. Ogunlesi, GIP’s chairman and CEO, will not only bring his expertise to BlackRock but will also join its board and global executive committee.

“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,” noted Fink and BlackRock President Rob Kapito in a memo to employees. “This will be one of the fastest-growing areas of our industry over the next 10 years.”

The deal, announced alongside BlackRock’s fourth-quarter results and a significant management shuffle, marks the firm’s largest acquisition since the 2009 purchase of Barclays Global Investors, propelling it toward becoming the leading provider of exchange-traded funds.

Fink, who built BlackRock on the success of low-cost index investing, is now betting on institutional investors’ willingness to pay higher fees for illiquid funds supporting major, complex projects. The acquisition aligns with BlackRock’s strategy to become a comprehensive solution for a full range of investing options, particularly in the realm of alternative assets.

While alternatives currently constitute approximately 3% of BlackRock’s assets under management, they contribute about 10% of the fees. The firm’s assets in illiquid alternatives witnessed a remarkable 65% increase over the past three years, and the 2023 acquisition of Kreos Capital further fueled its growth in private debt.

The combination of GIP, managing $100 billion, with BlackRock’s existing infrastructure assets of approximately $50 billion, positions the firm to compete with industry giants such as Macquarie Asset Management and Brookfield Asset Management. BlackRock has recently participated in significant investments in various projects, including pipelines in the Middle East, a carbon-capture initiative in Texas, and a fiber network venture with AT&T Inc.

The move into infrastructure comes as investors recognize opportunities in a market projected by McKinsey consultants to have a $15 trillion spending gap on global infrastructure through the end of the decade. GIP, a major player in the infrastructure domain, has notable stakes in busy airports, including London’s Gatwick, and has diversified its investments to include energy-transition projects and data centers, offering stable and recurring returns.

Founded in 2006 by Ogunlesi with backing from General Electric Co. and Credit Suisse, GIP has consistently demonstrated its prowess in the infrastructure sector. Its portfolio companies boast combined annual revenues exceeding $80 billion. Ogunlesi, also serving as Goldman Sachs Group Inc.’s lead director, has been instrumental in raising substantial funds for GIP, with the flagship fund, Global Infrastructure Partners IV, reaching a then-record $22 billion in 2019.

Five of GIP’s founding partners will join BlackRock, and approximately 30% of the shares will be deferred for about five years. BlackRock intends to issue debt to cover the cash portion of the deal. Perella Weinberg Partners advised BlackRock, while Evercore Inc. served as the lead adviser for GIP in this transformative transaction.

AUM crosses $10 trillion mark

The acquisition announcement coincides with firm’s release of its quarterly financials. In the fourth quarter of 2023, BlackRock experienced a substantial surge in client activity, as investors allocated $63 billion to its long-term funds. The influx of capital into exchange-traded funds and other products reflects a renewed confidence among investors, eager to deploy cash amidst the impressive performance of both stock and bond markets.

According to a statement released by BlackRock on Friday, the significant inflows and the positive market momentum propelled the company’s total assets under management just above the $10 trillion mark. While this exceeded the $9.8 trillion estimate predicted by analysts surveyed by Bloomberg, it narrowly missed the record AUM achieved two years ago.

Fink highlighted the company’s ability to deliver differentiated organic growth and maintain operating margins despite the challenging market and industry conditions in 2022 and 2023. Fink remarked, “When investors were ready to put money back to work, they did it with BlackRock.”

Notably, clients demonstrated a diversified interest in BlackRock’s offerings, with an addition of $33 billion to the firm’s separate cash-management business and money-market funds. This trend underscores BlackRock’s strategic positioning as a comprehensive one-stop shop for various investment needs.

Investors exhibited a strong preference for BlackRock’s ETFs, contributing $88 billion to these funds, while an additional $32 billion flowed into the company’s fixed-income funds. The robust demand for these investment vehicles contributed to BlackRock’s adjusted net income, which rose by 7% from the previous year to $1.5 billion, translating to $9.66 per share. This surpassed Wall Street’s average estimate of $8.88 per share. Additionally, the company reported a 7% increase in revenue, reaching $4.6 billion.

These positive results marked a turnaround from the third quarter when BlackRock experienced client withdrawals totaling $13 billion from its long-term funds. The fourth quarter’s resurgence in the stock and bond markets coincided with investors’ growing confidence that the Federal Reserve would shift its focus from raising interest rates to potential cuts in the coming year.

Alongside the financials, the firm also announced it is reorganizing its top management with the creation of a new global product strategy group led by Stephen Cohen. This group will focus on the global growth of exchange-traded funds and integrate active and index strategies.

Rachel Lord has been promoted to head all international business across Europe, the Middle East, India, and Asia-Pacific. The newly formed Global Product Solutions group aims to enhance the commercial focus on active and private market strategies, develop innovative investment strategies, and meet client demand for customized solutions.

The reshuffle gives Cohen and Lord more responsibilities, emphasizing BlackRock’s commitment to succession planning and developing the next generation of leaders.

Other notable changes include the departure of Salim Ramji, global head of iShares and index investments, and Edwin Conway, global head of equity private markets, both leaving the firm for other opportunities. Brent Patry will lead the equity private markets group, Susan Chan will become head of Asia-Pacific, and Charles Hatami will join the global executive committee.

Information for this story was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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