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BlackRock has struck a deal to buy Global Infrastructure Partners for more than $12.5bn in cash and stock, a move that will substantially boost the $10tn money manager’s footprint in alternative assets and shake up the landscape for private market investing.

Acquiring GIP, which has about $106bn in assets under management, would make BlackRock the world’s second-largest manager of private infrastructure assets, and bolster the leadership of its alternatives business.

GIP’s prime assets include Sydney and London Gatwick airports, the Port of Melbourne and the Suez water group, extensive green energy holdings and a stake in a big shale oil pipeline.

BlackRock has agreed to pay $3bn in cash and 12mn of its own shares to GIP’s six founders, including chair Adebayo Ogunlesi. Of the shares, 7mn will be handed over at closing, with 5mn more due in five years. The GIP principals intend to distribute some of the proceeds to their 400 employees. The group would collectively become BlackRock’s second-largest shareholder. 

Larry Fink, BlackRock’s founder, has been openly hunting for a transformational deal along the lines of the 2009 purchase of BGI from Barclays that gave BlackRock a dominant position in passive investing and helped make it the world’s largest money manager.

His courting of GIP, long considered one of the crown jewel platforms in the alternatives industry, started in September, as BlackRock sought to capitalise on rapidly rising demand for long-term investment funds focused on decarbonisation, energy security and power grids.

“The global need for infrastructure combined with high deficits constraining government spending creates unprecedented opportunity for private capital to invest in infrastructure,” he and BlackRock president Rob Kapito told staff in a memo announcing the purchase.

The deal could accelerate a wider wave of consolidation. The largest privately held alternative firms may be forced to consider stock market listings or strategic partnerships with traditional asset managers, many of which are looking to bulk up in private markets.

CVC Capital Partners, General Atlantic and L Catterton are among the prominent private equity groups considering going public, the Financial Times has previously reported. 

The acquisition comes as BlackRock reported adjusted net income of $1.45bn, comfortably above the $1.33bn expected by analysts polled by Bloomberg. Assets under management surged above $10tn for the first time since 2021 on the back of rising markets and $96bn in net inflows in the fourth quarter. Revenue was up 7 per cent year on year to $4.6bn and operating margins ticked up slightly to 41.6 per cent.

The robust performance and inflows come even though BlackRock has been the target of attacks from Republicans for what they call “woke capitalism” and criticism from climate activists for failing to do more to force companies to cut carbon emissions.

BlackRock also announced a major reorganisation that Fink said would “simplify and improve how we work” while meeting client demands for higher yields and customised investment products.

In infrastructure, BlackRock will combine its existing $50bn business with GIP under the leadership of Ogunlesi, who will join BlackRock’s global executive committee and board. He will resign as lead director of Goldman Sachs at the same time.

The firm will also bring together the iShares index funds with active funds and separately managed accounts under a new chief product officer, Stephen Cohen. A new international business structure, headed by Rachel Lord, aims to boost BlackRock in fast growing markets outside the US.

Executives at rival financial firms have been eyeing GIP as a possible acquisition for years, attracted by its record of making both financial and operational improvements to the assets that it buys. GIP’s portfolio companies have combined annual revenues of $75bn and employ 115,000 people.

The firm has 400 employees in 11 offices, compared with BlackRock’s 20,000. Both companies are headquartered in New York.

Before the deal, BlackRock was already a significant player in private markets, which are the fastest growing part of asset management and carry significantly higher fees. But the majority of its $275bn in alternative assets are in hedge funds, currencies and commodities. BlackRock is seen by some analysts and investors as punching below its weight in the long-term funds where GIP has quietly grown into a behemoth.

GIP president Raj Rao and BlackRock chief financial officer Martin Small will lead the integration process. The two sides are aiming to close the deal in the summer, but it is contingent on regulatory approvals and the go-ahead from the limited partners in GIP’s funds. GIP has no debt.

Fink and Ogunlesi have known each other since both were at Credit Suisse in the 1980s. Ogunlesi eventually rose to head investment banking at the now-defunct Swiss group before founding GIP in 2006 with backing from Credit Suisse and General Electric.

The $1tn infrastructure sector has benefited bolstered by a flood of money into private capital from institutional investors seeking long-term assets yielding more than traditional fixed income. Analysts predict that demand will increase as rich retail investors follow in their wake.

“We are about to see a golden age of infrastructure,” Ogunlesi said on an analyst call.

Michael Brown, analyst at KBW, called the deal “a game-changer for BlackRock’s alternatives platform” but cautioned that the firm “paid a premium price for a premium asset”.

BlackRock shares were largely flat in New York trading after the announcements.