Blackstone has announced it will launch a $40 billion infrastructure fund that will be geared toward investments in the US, with half of the capital coming via Saudi Arabia’s Public Investment Fund and the rest from other investors.
With the addition of debt financing, Blackstone will leverage the fund’s spending capacity to more than $100 billion. The MOU is non-binding and negotiations are expected to continue.
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The news comes after President Donald Trump visited Saudia Arabia over the weekend as part of his first foreign trip as commander-in-chief. Trump has promised to increase infrastructure investments through public and private spending; he reportedly plans to introduce a $1 trillion infrastructure package to Congress next week.
The Blackstone-PIF partnership in its current form would represent a huge win for the buyout giant, which experienced a 7% jump in its stock price Monday. It’s fair to note to note that Blackstone co-founder and CEO Stephen Schwarzman (left) has ties to the Trump administration. He serves as chair of the president’s strategic and policy forum, a group of business leaders that advise the president on economic matters. (Related: PitchBook detailed the president’s ties to the PE industry earlier this year.)
In a statement, Blackstone president Hamilton James explained the firm’s rationale behind the MOU.
“There is broad agreement that the United States urgently needs to invest in its rapidly aging infrastructure,” he said. “This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth. Blackstone has the talent, scale and experience to be an effective private sector partner in filling the massive infrastructure funding gap.”
On a broader level, infrastructure funds have continued to increase in size while Trump has pledged to improve the country’s roads, bridges and airports. In January, Global Infrastructure Partners closed its third namesake fund on $15.8 billion in what marked the largest infrastructure vehicle since 2000, per the PitchBook Platform. That came on the heels of Brookfield Asset Management closing its third infrastructure fund on $14 billion last year.
It wasn’t as if the infrastructure space had been struggling before Trump took office. In 2016, investors raised $39.44 billion via 23 funds, up from the $21.74 billion raised via 27 vehicles the year prior, per the PitchBook Platform. The latter mark has nearly been eclipsed already in 2017 without factoring in the Blackstone-PIF accord, as four funds have already raised $20.9 billion.
Interested in learning more about PE investments in the infrastructure space? Check out the top PE-backed infrastructure deals since 2010.
Article by Adam Lewis, PitchBook