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BlackRock buys Black-owned infrastructure firm GIP in $12.5B deal

The strategic move propels the world's largest money manager into the upper echelons of investors specializing in long-term ventures within the energy, transportation, and digital infrastructure sectors.

BlackRock buys Black-owned infrastructure firm GIP in $12.5B deal
Adebayo Ogunlesi has seen his infrastructure firm GIP acquired for $12.5 billion in a landmark deal with BlackRock Inc. WIKIPEDIA PHOTO

BlackRock Inc. has reached an agreement to acquire Global Infrastructure Partners (GIP), led by Adebayo Ogunlesi, in a landmark deal valued at approximately $12.5 billion, according to Bloomberg.

The strategic move propels the world's largest money manager into the upper echelons of investors specializing in long-term ventures within the energy, transportation, and digital infrastructure sectors.

BlackRock will deploy $3 billion in cash and approximately 12 million shares, equivalent to about $9.5 billion based on Thursday's (Jan. 11) closing prices. The acquisition, expected to be finalized in the third quarter, sees Ogunlesi, the former Credit Suisse executive and current chairman and CEO of GIP, joining BlackRock's board and global executive committee.

The purchase of GIP, a firm overseeing $100 billion in assets, represents BlackRock's most significant acquisition over a decade. It signals a pivotal step by BlackRock's CEO, Larry Fink, to position the firm as a key player in the rapidly expanding market for private and alternative assets.

In a memo to employees, Fink and BlackRock President Rob Kapito described the critical role of private capital in addressing the pressing need for new infrastructure, particularly in digital infrastructure, logistics, and decarbonization. According to Bloomberg, they foresee this sector experiencing remarkable growth over the next decade, fueled by record government deficits and increasing demand.

The acquisition, announced alongside BlackRock's fourth-quarter results and a substantial management reorganization, marks the firm's largest since the 2009 purchase of Barclays Global Investors. It sets BlackRock on a trajectory to become the foremost provider of exchange-traded funds.

Fink, who built BlackRock to provide cost-effective access to index investing, is now doubling down on the belief that major institutions will be willing to pay higher fees for investments in illiquid funds supporting significant, complex projects.

BlackRock aims to position itself as a solution for a wide range of investing options, catering to the growing demand for alternative assets from institutional clients such as pensions, endowments, and sovereign wealth funds. While alternatives currently represent approximately three of BlackRock's assets under management, they contribute around 10 per cent of the firm's fees, according to Bloomberg.

The firm's focus on illiquid alternatives has seen a 65 per cent increase in assets over the past three years. In 2023, BlackRock further strengthened its position by acquiring Kreos Capital to drive growth in private debt, the article reads.

Combining GIP with BlackRock's existing $50 billion infrastructure assets, the firm aims to create a formidable unit competing with industry giants like Macquarie Asset Management and Brookfield Asset Management. BlackRock has invested significant investments in the Middle East's pipelines, a Texas-based carbon-capture project, and a fibre network venture with AT&T Inc.

The growing interest in infrastructure within the alternatives market aligns with investor expectations of profiting from addressing the projected $15 trillion spending gap on global infrastructure through the decade's end. GIP, a significant player in this realm, has stakes in prominent airports, including London's Gatwick, and a portfolio spanning diverse projects from toll roads and bridges to energy-transition initiatives and data centers, according to Bloomberg.

Founded in 2006 by Adebayo Ogunlesi with backing from General Electric Co. and Credit Suisse, GIP has amassed an impressive portfolio with combined annual revenues exceeding $80 billion. Ogunlesi, who serves as Goldman Sachs Group Inc.'s lead director, will play a significant role in BlackRock's leadership following the acquisition.

In 2019, GIP set a then-record by raising $22 billion for its flagship fund, Global Infrastructure Partners IV, and has recently been actively raising a fifth fund. Five of GIP's founding partners will join BlackRock, with approximately 30 per cent of the shares deferred for around five years. BlackRock plans to issue debt to cover the cash component of the deal. Perella Weinberg Partners advised BlackRock, while Evercore Inc. served as the lead adviser for GIP, according to Bloomberg.