BlackRock Inc. declared its ambitions in private equity with the first deal from a new closely watched fund.
The money manager on Sunday said it purchased a stake in Authentic Brands Group, which owns brands including Sports Illustrated, Juicy Couture and Nine West, and controls licensing rights of celebrity brands from Muhammad Ali to Marilyn Monroe. The world’s largest money manager led the $875 million investment in Authentic Brands, which values the business in excess of $4 billion, according to people familiar with the matter. BlackRock is now its biggest investor.
BlackRock Chief Executive Laurence Fink met with the two top executives of Authentic Brands in the lead-up to the deal, quizzing them on the business and offering referrals during a nearly two-hour conversation, people close to the situation said.
Investing in a brand-licensing company allows BlackRock to tap into changing patterns in consumer spending while reducing the risks of having to back bricks-and-mortar retailers directly, said André Bourbonnais, a former chief executive of a Canadian pension fund who heads BlackRock Long Term Private Capital.
BlackRock grew from a small offshoot of private-equity firm Blackstone Group to the world’s largest money manager. The $6.8 trillion firm is a financial superstore offering everything from funds to portfolio construction tools to software for Wall Street.
In recent years, a crop of family offices, sovereign-wealth funds and other investment companies structured to hold private firms for as long as they want have become bigger forces on Wall Street. They are part of a radical shift in capital markets that has let companies such as Authentic Brands stay private longer.
BlackRock hopes the deal will be the first in a series that will help the firm close the gap with private-equity rivals—and drive momentum for a new fund designed to hold stakes for the long haul.
BlackRock hasn’t made a purchase out of the new private-equity fund until now. The firm set out to raise at least $12 billion in 2018; it has disclosed $2.75 billion in commitments so far. Some institutions were uncomfortable tying up money in a fund with no deadlines for returning investor money or a proven record of deals.
Authentic Brands has snapped up consumer labels and is looking to buy more brands of health-and-wellness companies. More recently, it has also explored buying the intellectual property of Barneys New York Inc. with an eye on exporting and reviving the department-store brand, a person said.
BlackRock’s long-term private capital fund is investing $625 million in Authentic Brands. All existing backers from General Atlantic to former basketball star Shaquille O’Neal are staying invested in the company. Meanwhile new ones, such as Singapore sovereign-wealth fund GIC, have come in, said a person familiar with the matter.
With the deal landscape getting more frothy, the team is focusing on companies its deal makers have followed for years, Mr. Bourbonnais said.
Authentic Brands Chief Executive Jamie Salter said his relationships with three Canadians behind the fund span years. “I’m a Canadian,” he joked. “The Canadians stick together.”
Mr. Bourbonnais is one of them. So is Colm Lanigan, a recent hire from the Abu Dhabi Investment Authority who helped seal the deal, as is Mark Wiseman, who leads BlackRock’s active equities and who was a major architect of the fund. Mr. Wiseman is a contender for the role as future CEO of the firm, said people familiar with the matter.
BlackRock and other asset managers are locked in an intensifying battle for deal makers. To help retain talent, the firm said in an August regulatory filing it will tweak how it pays a group of senior employees and tie their pay more closely to the returns of its illiquid funds.
Its alternatives arm cycled through various leaders in the past years. The new bosses of the group embarked on a listening tour this year to gather feedback from employees to improve how the business is run, said a person familiar with the matter.
BlackRock had $67.9 billion in assets in illiquid alternatives in June, up from $50.7 billion a year ago. These assets span energy pipelines, loans and other nontraditional strategies and were a cash engine for their small imprint within the firm: They made up roughly 2% of assets BlackRock managed and generated about 9% of revenue in 2018.
Dawn Lim – Read more on wsj.com