Blackrock buys $870m stake in Authentic Brands

Licensing group owns rights to Marilyn Monroe and Elvis Presley

Blackrock has sealed its first major buyout deal, scooping up Authentic Brands, the celebrity and clothing licensing group, as the world’s largest asset manager tries to muscle in on the private equity boom.

The asset manager will pay $870m for a controlling stake in New York-based Authentic Brands, which holds the brand rights to Marilyn Monroe and Muhammad Ali. It also owns Sports Illustrated magazine and is the majority shareholder in retailer Nine West.

The acquisition comes four months after Blackrock raised $2.75bn for Long Term Private Capital, its first private equity fund. It ultimately wants to raise $12bn for the fund.

Larry Fink, Blackrock’s chief executive, is spearheading a push into private equity as the group’s clients look beyond public stock and bond markets for juicier returns. Alternative investments, including private equity, generated 8 per cent of Blackrock’s

second-quarter revenues despite accounting for just 2 per cent of its assets. The bulk of the assets Blackrock manages are in passive investments with low fees.

“We are trying to do private equity in a different fashion and to address the issues investors have had with private equity in the past,” André Bourbonnais, global head of Long Term Private Capital, told the Financial Times. “We will be the only direct private equity fund within the Blackrock group.”

Authentic Brands, which is led by its founder and chief executive Jamie Salter, licenses 50 brands that together generate $9.3bn in annual retail sales, according to the company. Following the deal, Blackrock will be its largest shareholder.

Blackrock’s buyout vehicle is aiming to offer private equitylike returns for a low fee and is open- ended in nature. In this sense, the fund’s structure will resemble Warren Buffett’s Berkshire Hathaway as much as a private equity vehicle that typically locks up capital for around a decade.

Mr Fink told the FT in April that private equity is “something everyone should be focused on, as there are extraordinary flows going into an illiquid asset class”. He added that “if you have a client base with longer-dated liabilities you can have a higher percentage of illiquid investments”.

Blackrock appointed Edwin Conway to run Blackrock Alternative Investors, its private equity, private credit and real estate investing unit, as part of a management restructure earlier this year. In March, the company acquired private equity software platform efront for $1.3bn this year and will integrate the tool into its Aladdin system.

Private equity is dominated by a cohort of large buyout groups, including KKR, Carlyle Group and Brookfield. BlackRock’s efforts in this field position the funds giant as a rival to Stephen Schwarzman’s Blackstone Group, another leading private equity firm that previously owned a stake in Blackrock. Mr Schwarzman has described selling the Blackrock stake in 1994 to PNC Bank as a “heroic” mistake.