By Jack Pitcher
BlackRock has agreed to buy private-equity firm Global Infrastructure Partners for roughly $12.5 billion in cash and stock, a significant push into private-market investments for the world’s largest asset manager.
New York-based GIP owns and operates energy, transportation, and water and waste companies, including a stake in London’s Gatwick Airport. The acquisition would be BlackRock’s largest since it bought Barclays’s asset management business in 2009.
BlackRock separately reported its assets under management topped $10 trillion at the end of the fourth quarter for just the second time in its history.
To acquire GIP, BlackRock will pay $3 billion in cash and 12 million of its own shares, worth about $9.5 billion based on Thursday’s closing price. GIP is majority owned by its six founding partners, who will collectively become among the largest shareholders of BlackRock by acquiring about 8% of the shares outstanding, according to a person familiar with the deal.
Five of the six founding partners, including Chief Executive Bayo Ogunlesi, are joining BlackRock. Ogunlesi will sit on BlackRock’s board and resign as lead director of Goldman Sachs. He will lead BlackRock’s new infrastructure group.
“Infrastructure is one of the most exciting long-term investment opportunities, as a number of structural shifts re-shape the global economy,” BlackRock Chief Executive Larry Fink said in a statement. “Policymakers are only just beginning to implement once-in-a-generation financial incentives for new infrastructure technologies and projects.”
BlackRock has been pushing to expand its private-market operations, an area that is faster growing and potentially more lucrative than its core business of selling low-cost passive investment products such as exchange-traded funds. The deal will boost BlackRock’s private assets by about 30% and roughly double its private-market base management fees.
In GIP, BlackRock is buying an infrastructure fund manager with about $100 billion under management and $80 billion of combined revenue from its portfolio companies.
The deal is expected to close in the second or third quarter, after which BlackRock will create a distinct Global Infrastructure Partners business that combines the acquired firm with existing BlackRock infrastructure teams. BlackRock says the new business will be the second-largest private infrastructure manager globally with more than $150 billion in assets under management, trailing only Brookfield Asset Management.
Growing government deficits are increasing the need for private financing of major infrastructure projects, and subsidies can make the investments attractive, BlackRock Chief Financial Officer Martin Small said.
BlackRock favored acquiring GIP over a more-traditional private equity buyout firm in part due to the belief that private equity’s best returns from the zero-interest rate era are behind it, Small said.
For GIP, coming under the BlackRock umbrella should enhance scale and access to boardrooms and governments, said Raj Rao, president of GIP.
In a memo to employees, BlackRock concurrently announced a reorganization it calls its “biggest transformation in 15 years.” BlackRock will create a new global product services business that works across all of the firm’s investment strategies and fund structures, including the mammoth iShares ETF business. The division will aim to connect clients with all of BlackRock’s offerings, including public and private investments, and help “drive the next phase of growth for iShares,” the memo said.
Salim Ramji, the current global head of iShares, is leaving the firm “to pursue a new career path,” the memo announced.
BlackRock on Tuesday said it was laying off about 600 people, or 3% of global employees, to “reallocate resources.”
The company’s fourth-quarter earnings, also announced Friday, largely beat Wall Street’s expectations.
BlackRock said its assets under management rose to $10 trillion at the end of the fourth quarter, up from about $9.1 trillion three months earlier and roughly tied with its highest-ever total from the fourth quarter of 2021. Assets were boosted by higher markets and $96 billion of investor inflows to the firm’s products.
Per-share earnings of $9.15 beat the $8.73 expected by analysts polled by FactSet. Net income climbed 9% from the same period a year ago, and quarterly revenue rose 7%.
BlackRock shares closed 0.9% higher on Friday.
Write to Jack Pitcher at jack.pitcher@wsj.com