Investment company BlackRock Inc. will become the new owner of Global Infrastructure Partners (GIP), which was founded and is currently headed by Adebayo Ogunlesi.
The value of the specified deal will be about $12.5 billion. As a result of the acquisition of GIP, BlackRock will strengthen its status as the world’s largest financial manager, who, in the context of long-term prospects, works with projects related to spheres such as energy, digital infrastructure, and transport.
According to information that was released by the media, the investment company will pay an amount of $3 billion in cash and about 12 million shares worth approximately $9.5 billion. According to preliminary data, the acquisition of GIP will be completed in the third quarter of the current year.
Adebayo Ogunlesi, former chief executive of Credit Suisse and current chairman of the firm, which will soon be included in BlackRock’s ownership structure, will join the investment company’s board and global executive committee.
GIP currently manages assets with a total value of $100 billion. For BlackRock, the acquisition of this firm is the largest deal in more than a decade. For the chief of investment giant Larry Fink, in this case, there is a prospect of taking an important step in turning the company he heads into a key player in the market of private and alternative assets, demonstrating rapid growth.
Mr. Fink and BlackRock President Rob Kapito stated in a memo to employees that in the current reality, the need for private capital is increasing in such volumes that have not been observed before. According to them, the specified need is due to an unprecedented demand for new infrastructure, which is a kind of digital global ecosystem, modernization of logistics hubs, decarbonization, and energy security. Larry Fink and Rob Capito separately noted that another factor influencing the formation of a request for private capital is the record-high level of government deficits. They also believe that the specified segment will be one of the fastest-growing areas in the next ten years.
The previous BlackRock deal, which is comparable in actual scale and significance with intentions concerned with the GIP, was implemented in 2009. In this case, the acquisition of Barclays Global Investors is implied. After the implementation of this deal, BlackRock became the largest provider of exchange-traded funds.
Larry Fink created the mentioned company, betting that large and small investors would get cheaper access to financing indexes of public firms, rather than paying stock-pickers. The acquisition of GIP demonstrates a new understanding that large organizations will pay high fees to invest in illiquid funds supporting complex and large projects.
BlackRock is currently also striving to become a kind of one-stop shop. The company intends to offer a universal set of investment options, including alternative assets that are in high demand from institutional clients such as pension funds, endowments foundations, and sovereign wealth funds. The share of the specified resources in the structure of assets managed by BlackRock is approximately 3%, they bring in about 10% of fees.
The investment giant’s assets in illiquid alternatives increased by about 65% in the three years to September 2023. Last year, the company acquired Kreos Capital to stimulate an increase in private debt.
Combining GIP with infrastructure assets worth about $50 billion, which BlackRock managed in September, will create a unit capable of competing with major industry players, including Asset Management and Brookfield Asset Management. Over the past few years, the investment giant has provided multibillion-dollar financing for pipelines in the Middle East, a carbon-capture project in Texas, and a fiber network venture with AT&T Inc.
Infrastructure is gradually becoming something like the main center of interest in the alternative market. Currently, investors see opportunities to benefit by filling the shortfall in spending on relevant global projects. McKinsey project consultants predict that by the end of this decade, the lack of funding in the specified area may reach the $15 trillion mark.
GIP is currently one of the largest infrastructure investors in the world. The company is acquiring significant stakes in some of the world’s busiest airports, including London’s Gatwick. At the same time, infrastructure initiatives may involve less impressive projects, including toll roads and bridges.
Currently, many investment giants are paying attention to the prospects of financing the transition to a new generation of energy and participating in the monetary support of data centers. In this case, the interest is due to the stable, recurring returns that such assets generate.
Adebayo Ogunlesi founded GIP in 2006 with the support of General Electric Co. and Credit Suisse. The total annual revenue of portfolio companies in this giant of the investment industry is more than $80 billion. Mr. Ogunlesi is also currently a lead Director at Goldman Sachs Group Inc.
In 2019, GIP raised $22 billion for the flagship Global Infrastructure Partners IV fund. The five founding partners of the company will join BlackRock. About 30% of the shares will be repurchased with a deffer of about five years. BlackRock will issue debt obligations to cover the cash portion.
As we have reported earlier, Monzo Introduces Investments Powered by BlackRock.
