BlackRock strikes $12.5bn deal for Global Infrastructure Partners

NEW YORK/LONDON: BlackRock said on Friday it would buy Global Infrastructure Partners (GIP) for $12.5 billion in a major bet on alternative assets and announced a shake-up of its top management.

The deal - $3 billion in cash and 12 million BlackRock shares - will make the asset management giant one of the biggest players in alternative assets - with a combined $150 billion in assets - and private markets.

BlackRock, which manages $10 trillion across all markets, has been on the hunt for what it hopes will be a transformative deal, with Chief Executive Larry Fink last year telling analysts that it was engaged in more deal talks than it had been in “many, many years.” The company has a track record of adding assets in order to bolster growth and diversify during periods of market weakness.

Founded in 2006, GIP manages more than $100 billion in assets and has a portfolio including Britain’s Gatwick airport, the Port of Melbourne and major offshore wind projects.

“Infrastructure is one of the most exciting long-term investment opportunities, as a number of structural shifts re-shape the global economy,” said Fink.

“Bringing these two firms together will create the infrastructure platform to deliver best-in-class investment opportunities for clients globally, and we couldn’t be more excited about the opportunities ahead of us,” he said.

BlackRock also unveiled changes to its senior management structure, at a time when speculation has been growing over who will succeed Fink, who founded BlackRock in 1988, as CEO.

Stephen Cohen becomes chief product officer and will lead a new global product strategy group, while Salim Ramji, global head of iShares and index investments, is leaving, according to a company memo seen by Reuters.

BlackRock is also creating a new international business structure under Rachel Lord to lead Europe, the Middle East, India, and Asia Pacific, the memo said.

Five of GIP’s founding partners will join BlackRock including GIP Chairman Bayo Ogunlesi, who will also join BlackRock’s board of directors following closure of the deal, it added. Ogunlesi will step down from Goldman Sachs’ board following his move to BlackRock, Goldman CEO David Solomon said on Friday.

Blackrock shares fell 0.8% in pre-market trading.

Infrastructure is one of the most in vogue investment classes, aided by soaring demand for logistics and digital infrastructure, and the trillions of dollars needed for the transition away from high-carbon energy.

“At first glance, we view the transaction as a long-term positive as private equity and debt investing is one of the fastest growing categories within asset management,” said Kyle Sanders, an analyst at Edward Jones.

The Financial Times in December reported that BlackRock had held partnership talks with US-based private equity firm Warburg Pincus nearly two years ago.

PROFIT BEAT BlackRock also posted an 8% rise in quarterly profit, helped by a rebound in markets that boosted its assets under management.

Hopes of a soft landing for the US economy - a scenario where inflation eases without a sharp rise in unemployment - have cheered markets in recent months. A dovish tilt from the US Federal Reserve, which has left interest rates unchanged since July, has also boosted sentiment, helping BlackRock end the fourth quarter with $10.01 trillion in assets under management (AUM), up from $8.59 trillion a year earlier.

On an adjusted basis, BlackRock earned $1.45 billion, or $9.66 per share, for the three months ended Dec. 31, compared with $1.36 billion, or $8.93 per share, a year earlier.