BlackRock's Strategic Acquisition of GIP for $12.5 Billion to Solidify Its Alternatives Portfolio

In a significant expansion of its investment horizon, BlackRock Inc., the world's largest asset manager, has reached an agreement to acquire Global Infrastructure Partners (GIP), an infrastructure investment firm owned by Adebayo Ogunlesi, in a deal valued at approximately $12.5 billion. This acquisition positions BlackRock as a dominant force in the realm of alternative investments that focus on sectors such as energy, digital, and transportation infrastructure.

Details of the Acquisition

The financial terms of the deal involve BlackRock paying a combination of $3 billion in cash, alongside the issuance of about 12 million shares estimated to be worth around $9.5 billion. This strategic move is set to be completed in the third quarter of the year. Post-acquisition, Ogunlesi will serve on both BlackRock's board and its global executive committee.

BlackRock's Push into Alternatives

The acquisition of GIP—a firm managing assets worth $100 billion—marks BlackRock’s biggest deal since the purchase of Barclays Global Investors in 2009, which paved the way for its prominence in exchange-traded funds (ETFs). BlackRock’s CEO, Larry Fink, sees the potential growth in alternative investments, given the increasing need for private capital to fund infrastructure amid high government deficits. This move signifies a shift in investment strategy, as BlackRock aims to satisfy institutional demand for more diverse and long-term investment opportunities, especially in private and illiquid assets.

Impact on BlackRock’s Portfolio

The new addition to BlackRock’s portfolio will boost its infrastructure assets significantly, positioning it to compete with some of the industry's heavyweights like Macquarie Asset Management and Brookfield Asset Management. Already active in large-scale infrastructure projects, BlackRock seeks to become a one-stop shop for investors looking into alternatives. Despite alternatives making up only a small part of BlackRock's total assets under management, they contribute a disproportionately higher percentage of the firm’s fees, highlighting their profitability.

The Growing Infrastructure Investment Market

Infrastructure investment is gaining traction as a lucrative sector within the alternatives market. Experts from McKinsey predict a sprawling $15 trillion gap in global infrastructure spending by the decade's end. Firms like GIP have capitalized on such opportunities by investing in major assets like airports and energy facilities that promise stable, long-term returns.

A Look at GIP’s Background

Since its inception in 2006, GIP has risen to prominence in the infrastructure investment sector, leading to its current annual portfolio company revenues exceeding $80 billion. As GIP integrates into BlackRock, key founding partners of GIP will also come on board. The deal structure includes deferred shares and plans for BlackRock to raise debt to finance the cash portion of the purchase.

BlackRock, GIP, Infrastructure