Blackstone’s infra model shines in Atlantia take-private

The manager’s permanent capital approach undergoes its biggest test in what could end up being one of the largest takeovers of all time.

“You have entrepreneurs and families that have created these businesses that want to continue to have an ownership stake and are generally disinclined to speak to short-term capital that may want to come in, make a bunch of changes and put it on the block in three-to-five years.”

Paul Chapman, the New Mexico State Investment Council’s director of real estate and real assets, couldn’t have known last August how well his assessment would capture the competitive advantage Blackstone’s permanent capital model would bring to its multibillion euro take-private bid for Italian concessionaire Atlantia.

Chapman, whose NMSIC invested $100 million in Blackstone’s open-end infrastructure fund, was referring to the likes of data centre outfit QTS and fibre business Hotwire, when Blackstone’s permanent capital helped assuage the anxieties of founders who wanted to remain a part of the businesses they started.

That isn’t exactly the case with Atlantia. Blackstone’s bidding partner, the Benettons, didn’t establish the Italian concessionaire back in 1950. But the family, through investment arm Edizione, has been Atlantia’s main shareholder since it was privatised in 1999, remaining with it through thick and thin, including the tragic collapse of Genoa’s Morandi Bridge, in 2018, which claimed the lives of 43 people.

So, when the Benneton family was approached recently with an unsolicited takeover bid from a consortium of Global Infrastructure Partners, Brookfield and ACS – a bid that would have seen the Spanish developer subsequently acquire a majority of Atlantia’s highway concessions – Edizione was quick to say it was not interested in the bidders’ project, which would have led to “a break-up of the Atlantia group”.

Highlighting the “strategic nature” of its investment in Atlantia and its commitment to “maintaining its Italian roots”, chairman Alessandro Benetton zeroed in on what is important for Edizione: “In Blackstone, we have found not only a highly prestigious and solid co-investor, but also a clearly long-term partner […] ready to support us in the company’s development plans.”

So, Chapman couldn’t have known about Atlantia, but he was clearly on to something. And so was Sean Klimczak, Blackstone Infrastructure Partners’ global head, when he told us: “The power of our permanent capital model is that we can think about things like a strategic rather than a financial investor.”

That model is about to undergo its biggest test, the outcome of which is likely to have a ripple effect on the asset class.

First, if Blackstone does clinch this take-private, it will demonstrate conclusively that there is a market out there for large-scale permanent infrastructure capital. To date, practically all infrastructure mega-funds have followed the traditional closed-end model imported from private equity. Atlantia will make it harder to argue that’s the only – or even the better – way to go.

Secondly – and it bears repeating – Blackstone’s value-add, platform-building approach to investing is helping to counter the product segmentation some managers are pushing in relation to open-end funds. That asset-aggregation narrative, somewhat lazily copy-pasted from real estate, identifies open-end funds as the natural home for low-growth, low-returns infrastructure, with higher-returning, value-add assets the natural preserve of closed-end vehicles.

Finally, Atlantia – at €19 billion in equity and a €54 billion enterprise value – stands to be second only to Microsoft’s $69 billion acquisition of videogame maker Activision Blizzard as the year’s biggest deal – and one of the largest ever M&A transactions. Much like Antin Infrastructure Partners’ IPO last year, which was the Paris Stock Exchange’s largest, Atlantia underlines how red-hot the asset class is these days (we told you this was going to be infrastructure’s decade).

But it’s not just that. At the time of Antin’s IPO, Reuters Breakingviews cannily quoted the writer Voltaire’s “pour encourager les autres” to highlight the inspirational power of the French manager’s listing.

Therein lies Atlantia’s true potential, too: to tantalise private capital with the scale on offer and make the case that a long-term asset class such as infrastructure deserves a long-term funding model – no ifs, ands or buts.