BlackRock Shifts Focus On Luxury Sector After Disappointing Biofuel Investments

Luxury Boutique
(Photo: Picture from Pixabay)

BlackRock, dubbed as the world's largest asset manager today, bought nearly 30 percent stake in New York-based Authentic Brands Group which claims the title as of world-leading brand development, marketing, and entertainment company. The fund manager paid $875 million for the stake, immediately pulling Authentic Brands' valuation roughly between $4 and $4.5 billion. 

The deal was directly overseen by BlackRock's new private equity fund, Long Term Private Capital or LTPC which now became the largest investor in Authentic Brands. Market observers described the multibillion investment as "strategic" for BlackRock with Authentic Brands being the owner of a portfolio comprised of more than 50 iconic and world-renowned brands.

Authentic Brands is relatively a young company being only founded in 2010. In that short time, however, its portfolio of brands has brought in about $10 billion in annual worldwide revenue.  The brands it manages span across 70 countries and are currently the big players across different market sectors, including the luxury segment, and specialty and mid-tier retail channels with both eCommerce operations and  -and-mortar locations. 

Among the popular brands it manages are Marilyn Monroe, Elvis Presley, Muhammad Ali, Shaquille O'Neal, as well as Greg Normal, Thalia Sodi, and Neil Lane. It is also the management company behind Nautica, Aeropostale, Nine West, Juicy Couture, Frye, Spyder, and Prince and Judith Leiber. 

Authentic Brands has also recently acquired Sports Illustrated. All these big names proved its portfolio is truly diverse, ranging from the lifestyle niche, sports, celebrity, entertainment, and media. 

BlackRock's multibillion investment announced on August 11 took place barely a month after reports said it incurred an estimated loss of about $90 billion over its misplaced investments in fossil fuel companies. The amount piled over the last ten years in what market experts said was hurried investment decisions.

The fund manager has, in fact, slashed significant portions from its fund estimated to be worth $6.5 trillion, according to an analysis released by the Institute for Energy Economics and Financial Analysis. Of most particular misstep was investing in oil companies that had already undergone devaluation due to their reluctance in engaging in clean energy initiatives. 

The report found that major players in the oil industry such as ExxonMobil, Chevron, Shell, and BP, were responsible for the significant losses incurred by BlackRock. Other factors that pulled down BlackRock's participation in the oil and gas sector were General Electric and coal mining company Peabody, according to the report.  

Meanwhile, for its deal with Authentic Brands, BlackRock will be working closely with Chairman and CEO James Salter and President and CMO Nick Woodhouse. It will also join other investors in Authentic Brands, including Leonard Green & Partners, General Atlantic, Lion Capital, Simon Property Group, and Brookfield Properties' retail group. 

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