BlackRock Inc. is set to deepen its footprint in the infrastructure market with the acquisition of Global Infrastructure Partners (GIP). The deal, worth $3 billion in cash and approximately 12 million shares, is a strategic move guided by the current market valuation of the infrastructure sector at $1 trillion. Experts predict this sector to be one of the fastest-growing markets in the upcoming years, driven by a surge in global demand for improved digital infrastructure, transportation hubs investment, and a worldwide shift towards decarbonization and energy security.

Unveiling the Acquisition
Established in 2006, GIP manages over $100 billion in assets and has earned a reputation for significantly enhancing the performance of its portfolio companies. The firm employs around 400 individuals and oversees more than 40 companies. These companies generate over $75 billion in annual revenue and provide employment to approximately 115,000 people globally. With this acquisition, BlackRock intends to create a market-leading multi-asset class infrastructure investing platform with a combined client AUM of over $150 billion across equity, debt, and solutions.

Financial Implications and Expectations
BlackRock plans to finance the cash component of the purchase by incurring around $3 billion of additional debt. The company expects the acquisition to have a slight positive impact on its adjusted earnings per share (EPS) and operating margin in the first year following completion, expected in the third quarter. Over the past year, BlackRock’s stock has surged by 5%, while the S&P 500 has seen a 20% gain. With this strategic acquisition, BlackRock aims to further strengthen its position in the market.

Looking Forward
The acquisition of GIP is a significant push into private market investments for BlackRock, marking its largest acquisition since buying Barclays’s asset management business in 2009. This move is expected to place BlackRock among the top ranks of long-term investors focusing on energy, transportation, and digital infrastructure. The integration process will be led by GIP president Raj Rao and BlackRock chief financial officer Martin Small, with the aim to close the deal in the summer, contingent on regulatory approvals and the go-ahead from the limited partners in GIP’s funds.

Source: bbn