BlackRock to acquire First Reserve’s infra business

The deal further signals the asset manager's interest in energy having hired a Madison Dearborn MD last year to build a strategy focusing on the sector.

BlackRock has made another stride towards becoming a dominant infrastructure player by agreeing to buy First Reserve Energy Infrastructure Funds, the infrastructure unit of the eponymous energy buyout specialist, for an undisclosed amount.

The deal will see 37 investment professionals and support staff migrate to the world's largest asset manager, where they will continue to oversee the $3.7 billion of committed capital FREIF manages across two funds. Since 2010, the team has closed 21 investments spanning North America, Latin America, Europe and Southeast Asia.

The transaction is set to bring BlackRock's infrastructure assets under management to about $14 billion.

The firm emphasised its willingness to guarantee continuity as FREIF comes under a new roof, with the team to keep on seeking assets capable of generating “contracted revenue, visible yield streams and long-term capital appreciation”. Its remit will cover four broad sectors: contracted power, contracted midstream, other contracted energy assets and regulated transmission and distribution.

The transaction, still subject to regulatory clearance, is expected to close by the end of Q4. It comes nearly a year after BlackRock's debut collaboration with First Reserve, through which both partners jointly invested $900 million to buy a 45 percent equity stake in two gas pipelines from a subsidiary of PEMEX, Mexico's national oil group.

The deal is also in line with BlackRock's track record of buying businesses that are well placed to tackle investment opportunities created by “structural shifts”, Jim Barry, head of BlackRock Infrastructure, told Infrastructure lnvestorin a keynote interview last March.

In June 2015, the firm acquired Infraestructura Institucional, a Mexico City-based outfit, to further its presence in the Latin American country. “It's true that Mexico offers lots of opportunities in pipelines and power generation,” Barry commented last March. “It's also true that Mexico, like the US, has a larger share of energy opportunities compared to other markets like Europe.”

The firm further signalled its interest in energy in June when it hired Pat Eilers to build a North American equity strategy focused on conventional power and energy. “We are extending our capability beyond renewable power and Pat is the first step in that regard,” Barry told Infrastructure Investor then.