Blackrock and Global Infrastructure Partners

Update on Blackrock’s Acquisition of Global Infrastructure Partners

Context:

On January 12, 2024, BlackRock, the world’s largest asset management company with over $10 trillion in assets, announced its acquisition of Global Infrastructure Partners (GIP), an infrastructure fund manager, for $12.5 billion. The deal marks one of the largest acquisitions in the past 12 months and signifies an increase in market confidence as M&A volumes are expected to pick back up in 2024.

Overview:

GIP’s existing management team, led by founding partner Adebayo O. Ogunlesi, will lead the enlarged infrastructure platform after the close of the transaction. Ogunlesi is also expected to join BlackRock’s board of directors, adding an asset to BlackRock’s seasoned management team.

Ogunlesi expects the two businesses to complement each other well, saying, "BlackRock focuses mostly on mid-cap transactions, GIP on large cap. BlackRock has a good debt offering, mostly investment grade, while GIP targets deals below investment grade.”

With GIP’s specialization in energy, transport, water and waste, and digital sectors, BlackRock will add valuable assets such as the Port of Melbourne, the UK’s Gatwick airport, and an oil and gas joint venture with Hess.

Technical:

BlackRock financed the purchase with $3 billion in cash and about 12 million in BlackRock common shares, adding $106 billion in infrastructure assets to their portfolio. Now, BlackRock will hold over $150 billion in infrastructure assets, including their existing infrastructure equity and debt holdings.

To finance the cash payment needed to purchase GIP, BlackRock plans to raise debt. The purchase price was a multiple of about 25x-29x GIP’s expected 2024 earnings. While this multiple appears high, it is reflective of GIP’s low risk profile and predictable cash flows generated from fee-based earnings.

Upon announcing the acquisition, BlackRock’s shares jumped 1% in after hours trading, signifying high investor confidence in the deal.

Analysis:

BlackRock recent acquisition of GIP represents a major bet on the rapidly growing infrastructure market worth over $1 trillion today. Infrastructure is forecasted to be one of the fastest growing segments within private markets supported by long-term trends including increased demand for digital infrastructure, logistical hubs, and renewable energy. Part of this growth can also be attributed to policy makers implementing financial incentives to develop new infrastructure projects.

Additionally, the acquisition will make BlackRock a major player in infrastructure, allowing it to compete with firms such as BlackStone and Apollo Global Management. With high expected future growth in the sector, BlackRock stands to benefit handsomely.

The GIP deal will add to a BlackRock’s successful resume of high profile buyouts, including the purchase of Merrill Lynch Investment Managers in 2006 and Barclays Global Investors in 2009. With increased economic growth expected in 2024 due to an expected lowering of interest rates in the latter half of the year, BlackRock can expect increased growth this fiscal year.