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BlackRock’s $12.5bn Acquisition of Global Infrastructure Partners

By Rafi Glass, Yana Zharkova, James Searle, Guy Collins, Ruiting Yi, and Marcin Wolniewicz (Durham University); Devina Aggarwal, Atin Narain, Nathaniel Mathew, Shreyas Mehta, and Omar Ali (Yale University)


Photo: Jacek Dylag (Unsplash)

 

Overview of the deal


Acquirer: BlackRock

Target: Global Infrastructure Partners

Implied Equity Value: N/A

Total Transaction Size: $12.5 billion

Closed date: Expected to close in the third quarter of 2024

Target advisor: Evercore (financial), Kirkland & Ellis LLP, and Debevoise & Plimpton LLP (legal).

Acquirer advisor: Perella Weinberg Partners (financial), Skadden, Arps, Slate, Meagher & Flom, and Fried, Frank, Harris, Shriver & Jacobson LLP (legal).


BlackRock's agreement to acquire Global Infrastructure Partners (GIP) constitutes a big step towards establishing the world’s pre-eminent infrastructure investment platform. With this merger, BlackRock is set to significantly enhance its infrastructure portfolio, combining its expansive financial and corporate networks with GIP's deep sectoral expertise and management of over $100 billion in assets. This strategic acquisition - involving $3 billion in cash and approximately 12 million shares of BlackRock stock (worth $9.5 billion) - facilitates the realisation of a shared ambition to capitalise on the burgeoning infrastructure market, driven by escalating demands for digital, energy, and transportation advancements.  


The integration of BlackRock and GIP is designed to create a robust, diversified investing platform, commanding over $150 billion in client infrastructure AUM across various asset classes. This collaboration is expected to bolster deal flow, co-investment opportunities, and operational efficiencies, maximising value for investors and stakeholders alike. Positioned at the forefront of digitalization, decarbonization, and public-private partnerships, the BlackRock-GIP merger is well positioned to navigate and exploit the dynamic infrastructure investment landscape.


"We are convinced that together we can create the world’s premier infrastructure investment firm" - Adebayo Ogunlesi, Founding Partner, Chairman, and CEO (GIP)

Company Details (Acquirer - BlackRock)


BlackRock is one of the world’s leading providers of investment, advisory and risk management solutions. BlackRock operates through 70 offices across 30 nations, serving clients in over 100 countries. It is a key player in managing the iShares exchange-traded funds and is grouped with The Vanguard Group and State Street as one of the top three index fund managers. The company's Aladdin software is used by numerous major financial institutions to monitor investment portfolios. BlackRock Solutions, a division of the company, offers services in financial risk management. By 2023, BlackRock secured the 229th spot on the Fortune 500 list, which ranks the largest corporations in the United States by revenue.


Founded in 1988, headquartered in New York, NY/USA

CEO: Larry Fink

Number of employees: 19000+

Market Cap: $ 118.72 bn (as of 15/02/2024)

EV: $ 121 bn

LTM Revenue: $ 17.86 bn

LTM EBITDA: $ 6.76 bn 

LTM EV/Revenue: 6.77

LTM EV/EBITDA: 17.89


Recent Transactions: Kreos Capital (June 2023), Baringa Partners (June 2021); $1.05 bn acquisition of Aperio  (Feb 2021)


Company Details (Target - Global Infrastructure Partners)


GIP is one of the world’s largest private infrastructure investors. It covers many sectors, such as energy, transportation, digital, water and waste. GIP manages approximately $100 billion in assets and has a portfolio of companies with combined annual revenues exceeding $75 billion. GIP is targeting $25bn for its latest infrastructure fund. GIP's significant investments include assets in the transportation sector, such as airports (eg. Edinburgh Airport), seaports (eg. Ports of Melbourne and Brisbane), and freight rail facilities (eg. Pluto Train 2), as well as energy and water-related assets (eg. Biffa and SUEZ Group). ESG concerns are at the core of GIP’s approach to investing.


Founded in 2006, headquartered in New York, NY/USA

CEO: Adebayo Ogunlesi

Market Cap: N/A 

EV: N/A

LTM Revenue: $35m

LTM EBITDA: N/A

LTM EV/Revenue: N/A

LTM EV/EBITDA: N/A


Projections and Assumptions


Short-term consequences


This strategic move places BlackRock in a leading position to provide essential infrastructure projects across the globe. Global Infrastructure Partners has consistently ranked in the world’s top 3 infrastructure investment managers - alongside Macquarie and Brookfield - and so BlackRock has combined with a true industry heavyweight. BlackRock's purchase of Global Infrastructure Partners highlights infrastructure investment as a pivotal component of the global economy.


Following this transaction, BlackRock will oversee around $150 billion in infrastructure assets. These encompass a wide array of sectors,  including liquified natural gas (eg. 46% of Rio Grande’s LNG terminal), wastewater management services (eg. the Veolia project in France), and major transportation hubs (eg. Edinburgh and Sydney airports). In some instances, BlackRock’s stewardship may result in halting GIP investments; the Rio Grande LNG terminal, for example, has proved particularly controversial in interfering with the sacred land of the Carrizo Comecrudo Tribe of Texas. 


BlackRock will therefore take control of a broad array of investments. These investments underscore a rising demand for both logistical and digital infrastructure, spurred by the global pivot from high-carbon to more sustainable energy sources. GIP’s energy portfolio in particular coincides with BlackRock’s investment focus, and with general trends in the US. BlackRock has traditionally invested in public energy companies - in the US alone it has invested $170 billion on behalf of American energy companies - partnering with both mainstay energy companies and start-ups to facilitate the development of new technology for the world of tomorrow. 


Long-term Upsides


The BlackRock-GIP deal signifies a strategic shift in the infrastructure investment landscape, projected to become a $1 trillion market. This merger not only anticipates the accelerated growth driven by the global demand for digital infrastructure upgrades, logistical hub revamps, and a move towards decarbonisation and energy security, but also redefines BlackRock's position in the private capital industry.


This transaction is expected to nearly double BlackRock's private markets management fees to over $1.5 billion, with GIP's contribution of more than $400 million in post-tax annual fee-related earnings, elevating profitability margins above 50%. The merger not only marks a pivotal transformation for BlackRock towards managing more complex, illiquid investments but also heralds a new era in alternative and private asset investments, positioning BlackRock at the forefront of this market shift. Investors, facing a decline in public equity options, are seeking out alternative and private investments such as digital and eco-friendly infrastructure to enhance portfolio returns and explore new opportunities. The shift, driven by the necessity for diversification and the allure of untapped markets, is supported by innovation in product development, along with regulatory and technological advancements, aiming to capture the vast potential of a $1 trillion emerging market.


Creating a 'one-stop shop' for infrastructure investment, the deal merges GIP's specialised expertise with BlackRock's extensive network, aiming to serve a wide range of clients with a $150 billion portfolio. This strategic alliance is set to deliver unmatched solutions across equity, debt, and beyond, establishing new industry standards for infrastructure investment and diversification. 


Risks and Uncertainties


The asset manager will have to contend with global economic uncertainties. Larry Fink, BlackRock’s global chief, argues that infrastructure offers stable returns and large profits. However, as Reuters notes, the current economic climate is one of tight monetary policy. The problem this presents is that infrastructure projects are often heavily leveraged, and while low interest rates in the early 2000s allowed projects to take on more debt and better handle setbacks, the same cannot be said for the post-Covid era. Similarly, infrastructure assets - being stable, cash generative and expected to last a long time - are often sensitive to interest rate changes, in comparison with global equities. 


The second risk is reputational. By acquiring Global Infrastructure Partners, BlackRock is acquiring a stake in heavily polluting projects, including oil pipelines and 3 UK airports. This risks alienating its ESG leaning investors. BlackRock had been championing a profit-motivated transition to greener investments and had been pushing its companies to improve their ESG credentials. However, the acquisition of GIP will likely raise questions about BlackRock’s stance on such issues in an environment where conscious investing has taken on more importance. It is the ambition of the UK and many EU countries to phase out fossil fuel usage by 2050.


Fink, however, sees this as an opportunity, saying "infrastructure is one of the most exciting long-term investment opportunities, as a number of structural shifts re-shape the global economy".


Sources


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