Photo Credit: Tekedia

BlackRock Inc., the world’s largest money manager, has recently announced its monumental acquisition of Global Infrastructure Partners (GIP) for an impressive $12.5 billion, according to Bloomberg. The deal involves a significant $3 billion in cash and around 12 million shares, valued at approximately $9.5 billion based on Thursday’s closing prices.

This strategic move is set to reshape the financial landscape, marking BlackRock’s most substantial deal since the acquisition of Barclays Global Investors in 2009. Aligned with the vision of BlackRock’s CEO, Larry Fink, the acquisition positions the firm as a major player in the rapidly expanding market for private and alternative assets.

The closure of the deal in the third quarter will see Adebayo Ogunlesi, GIP’s esteemed Chairman and CEO, 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.

Founded in 2006, GIP, with support from General Electric Co. and Credit Suisse, boasts portfolio companies with a collective annual revenue surpassing $80 billion. The market response to the announcement led to 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.

The acquisition marks a pivotal shift for BlackRock, moving away from its traditional focus on index-based investing towards becoming a major player in illiquid funds supporting complex 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 creates a formidable unit, rivaling industry giants. BlackRock’s involvement in substantial infrastructure investments worldwide further solidifies its position in this space.

Despite alternatives constituting around 3% of BlackRock’s assets under management, they contribute a significant 10% of the firm’s fees. 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.

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 plans to issue debt. 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.

Credit: Tekedia