BlackRock’s New Long-Term Private Equity Fund Lands First Deal

BlackRock’s new private equity fund has bought a stake in Authentic Brands Group, marking its first deal with an investment pool that’s pushing the buyout industry to evolve.

The firm led an $875 million equity investment in the iconic brands business, becoming its largest shareholder, according to André Bourbonnais, the head of BlackRock’s long-term private capital team, known as LTPC. The deal includes $625 million from the LTPC fund and $250 million of co-investment, giving BlackRock shared control of ABG with founder James Salter and management, Bourbonnais said in a phone interview.

ABG — whose brands include Marilyn Monroe, Muhammad Ali, and Elvis Presley — has been backed by private equity for years. BlackRock joins existing stakeholders Leonard Green & Partners, General Atlantic, Lion Capital, Simon Property Group, Brookfield Properties, and retired basketball star Shaquille O’Neal.

BlackRock is aiming to raise $10 billion to $12 billion for its LTPC fund, which is designed to hold companies for as long as forever while charging lower fees to investors. As its first deal, ABG is critical as the firm continues fundraising globally for the new private equity pool.

“That deal was right in the middle of the fairway of our strategy,” Bourbonnais said. “We have good momentum in the market.” 

[II Deep Dive: Private Equity Drove Two Canadians Crazy. At BlackRock, They’re Trying to Fix It.]

LTPC has told investors that it’s targeting companies with long track records that produce high cash flow and are led by “extraordinary” management teams, according to Bourbonnais. He said the fund also seeks control — or shared control —of companies than can grow organically and externally.

“We found all of this in ABG,” said Bourbonnais, who in May told Institutional Investor that LTPC was nearing its first investment.

The deal, led by BlackRock’s Colm Lanigan, was “fairly complex,” he said, partly due to its mix of shareholders. The firm did not add any debt to AGB’s balance sheet, or refinance the existing borrowings of the private equity-backed company, according to Bourbonnais. 

The investment from BlackRock values ABG at around $4.5 billion, including existing debt, Salter said in a phone interview. Singapore’s sovereign wealth fund GIC Private Limited co-invested $150 million in the deal with BlackRock, while Jasper Ridge Partners contributed $80 million, he said.

Founded in 2010, ABG announced in June of that year that it had raised $250 million of equity from private equity firm Leonard Green, Counsel Corp.’s Knight’s Bridge Capital Partners, and Salter. 

In 2016, Lion Capital said it was buying a minority stake in ABG, a deal that would leave Leonard Green and Salter as majority owners of the brand development company. ABG announced the following year that it received a growth equity investment from General Atlantic.

“We had to address different sellers that got in at different times,” said Bourbonnais, “and negotiate also what their role would be on an ongoing basis.” 

Under the ownership of BlackRock, the world’s largest asset manager, the New York-based company will expand geographically and through “better use of technology,” according to Bourbonnais. 

ABG’s portfolio of more than 50 brands in the lifestyle, sports, celebrity, entertainment, and media sectors — including Nine West, Spyder, and Sports Illustrated — produces almost $10 billion in global revenue annually. The company has made several acquisitions for its portfolio in the past several years, including a majority stake in the Shaquille O'Neal brand in 2015. O'Neal, who was inducted into basketball’s Hall of Fame in 2016, was the first “living legend” to join its celebrity and entertainment roster and also become a shareholder, ABG said when announcing General Atlantic’s investment.

Salter likes that LTPC is willing to remain an investor for more than a decade, allowing him to focus solely on growing the business. “That was really important to me,” he said. “I don’t need to think about the next private equity guy for the next 10 years.” The ABG founder said he believes the company’s earnings could double over the next three years as it seeks acquisitions globally.

The deal with ABG gives BlackRock exposure to the consumer sector with limited risk, according to Bourbonnais. The brands company doesn’t own stores and the production risk is with the licensee, he explained.

“It’s really an IP business,” Bourbonnais said. “It’s the best way we found to have access to consumer discretionary.”