Private Equity Targets a Risky Stagflation Bet
Demand for infrastructure assets is strong. They’re an inflation hedge and debt is available for deals. But auctions and pricier financing will squeeze returns.
Cellphone towers have room for more antennae — one of the attractions of these real-estate assets to private equity.
Photographer: George Frey/BloombergWhile leveraged buyouts struggle, one corner of private equity just keeps on going — the pursuit of infrastructure assets such as airports, gas pipelines and broadband networks. Combine strong demand for these inflation-proof businesses with rising borrowing costs, and the risk of overpaying for deals is rising.
The Italian billionaire Benetton family and Blackstone Inc. clinched an agreement in April to buy out minority shareholders in listed toll-road operator Atlantia SpA, seeing off a rival consortium including construction tycoon Florentino Perez. Meanwhile, National Grid Plc is offloading a controlling stake in its UK gas-transmission business to a Macquarie Asset Management consortium. Deal activity has held up, with debt financing still readily available.