Blackstone's Strategy and Legal Pathways in Acquiring AirTrunk

BSLB
Mar 19
3 min read

Blackstone is the world’s largest alternative asset manager, leading financial company in the private equity and leveraged buyout sectors, i.e. acquisition of corporate shareholdings following indebtedness and payment of debt through proceeds generated by the acquired company.

On September 4, 2024, the Funds managed by Blackstone Real Estate Partners, Blackstone Infrastructure Partners, Blackstone Tactical Opportunities, and Blackstone’s private equity strategy for individual investors, along with the Canada Pension Plan Investment Board (“CPP Investments”), have entered into a definitive agreement to acquire AirTrunk, the leading Asia Pacific data center platform, from Macquarie Asset Management and the Public Sector Pension Investment Board, for an implied enterprise value of over A$24 billion. This has represented the largest investment in the region, and it is subject to approval from the Australian Foreign Investment Review Board.

AirTrunk is a data center company which operates across key markets including Australia, Japan, Malaysia, Hong Kong, and Singapore, with over 800MW of capacity committed to customers and land holdings capable of supporting over 1GW of future expansion.

In addition, as Sean Klimczak, Global Head of Blackstone Infrastructure and Nadeem Meghji, Global Co-Head of Blackstone Real Estate said, the acquisition aligns with Blackstone’s focus on digital infrastructure, driven by unprecedented demand from AI innovation and the broader digitization of the economy. AirTrunk is supposed to grow Blackstone’s existing investments, which include a US$55 billion portfolio of data centers and a significant pipeline of future developments. Blackstone’s strategy also integrates investments in renewable energy and utility companies to address the power needs of the digital infrastructure sector.

To be more specific, Blackstone used a strategic combination of equity and debt financing to acquire AirTrunk, which ensures an optimal balance between risk and potential return on investment. By utilizing this financial structure, Blackstone can maximize the profitability of the operation while minimizing financial and market risks. In addition, tax planning was a crucial factor in the transaction.

Furthermore, Blackstone implemented tax optimization by using favorable jurisdictions for holding companies, a strategy that reduces the overall tax burden and enhances the financial efficiency of the project. This methodology is particularly significant in large-scale operations such as AirTrunk's acquisition, where effective tax cost management can have a substantial impact on the long-term profitability of the investment.

Robin Khuda, the CEO of AirTrunk, who will retain a stake in the company, emphasized that this deal represents a milestone in strengthening AirTrunk’s platform during a period of soaring demand for digital infrastructure and cloud services. The involvement of Blackstone goes beyond the acquisition itself: it has been pursuing a broader strategy of targeted investments in digital infrastructure for a long time. QTS, CoreWeave, and Digital Realty, all leaders in the data center industry, are already included in its portfolio. This strategic vision aligns with the global expansion of the sector, which is expected to attract over a trillion dollars in investments in the coming years, both in the United States and other key regions.

Through an investment of A$24 billion, equivalent to approximately US$16.1 billion, part of the resources that make up the four segments in which Blackstone Group operates, will be used to acquire a majority stake, equal to 88% of the share capital, in AirTrunk, ensuring that the new owners have direct control over the target company, managing its activities and being able to guide strategic and organizational decisions.

The acquisition by Blackstone is in fact the purchase of a shareholding so large that it guarantees full control of AirTrunk’s activities through the administrative and patrimonial rights attached to this shareholding: in particular, the NY-based giant will be able to govern AirTrunk’s operations without any obstacles, holding an absolute majority of its shareholdings; in this way, not only Blackstone will be able to adopt all the choices physiologically functional to the life of the institution, but it will have a direct and almost absolute control on the appointment of the administrative body, entrusted to the management in concrete activity.

Through such transactions, although formally there is a distinction between legal entities because there was no merger, in substance, there is not a real separation because the choices of a company depend directly on the choices of another entity, overseen by power relations.

In conclusion, Blackstone demonstrates a near-predatory ability to seize opportunities in emerging markets and quickly establish itself as a dominant player. The future of digital infrastructure, fueled by an insatiable demand for connectivity and computational power, is vast. Blackstone’s dominant position in this industry ensures that it will remain a major player on the global stage.

CC: Alessandro Chiaromonte, Beatrice Pratelli, Giorgia Zedda