Who needs rewards? Not Blackstone
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In private equity, it’s good to be king.
Blackstone has reached an agreement with Emerson Electric to buy a majority stake in its climate tech business. The large leveraged buyout runs counter to the new reality on Wall Street and speaks volumes about how Blackstone views the housing market, the debt market, and its own power in both.
If you want a well done LBO…
Blackstone is the world’s largest owner of commercial real estate and the $600 billion private equity giant continues to add to its vast land grab. The firm takes a particular look at rental housing, which it considers to be an ideal lever to counter the rise in inflation, since rents often increase faster than the price of milk.
So, with its unique knowledge of the real estate landscape – and for the chance to sell other building owners energy-efficient and cost-effective heating and cooling systems – Blackstone is investing $4.4 billion in a deal that will values Emerson’s unit at $14. billion …and what’s more ESG than that?
- While the deal only gives Blackstone a 55% stake in the new entity, the terms of the takeover provide both upside and downside protection. Allowing Emerson to stay involved increases the chances that the HVAC unit will thrive, but if it doesn’t, Blackstone will receive preferred shares in the deal that are essentially an exit hatch for capital.
- Blackstone could also sell itself CVCs. In June, the company completed its $6 billion acquisition of Preferred Apartments Communities, adding its roughly 12,000 homes in the American Southeast to an incredibly large rental portfolio.
Blackstone is one of the few companies interested (or even able) to execute a takeover of this magnitude with rising interest rates making the stock market more volatile than dinner with Tom and Gisele. To get a big deal done, buyout players typically need banks to line up debt outside of debt investors, but Blackstone alone released $5.5 billion in debt funding for Emerson’s deal. . Because it could.