The Canada Pension Plan Investment Board is considering partnering with Microsoft (NASDAQ:MSFT) and private equity fund Silver Lake Partners to take a run at Yahoo, sources told the Wall Street Journal.
Yahoo (NASDAQ:YHOO) has a current market capitalization of about US$20 billion. According to the report, Microsoft would take the largest stake in Yahoo — and put up most of the financing — with the CPPIB and Silver Lake taking minority stakes.
Microsoft tried to acquire Yahoo a few years ago when the company was worth nearly twice as much as today. If the Canadian pension fund gets involved it would be part of the biggest deal in the fund's history.
A spokeswoman for CPPIB said the investment fund does not comment on rumours in the marketplace.
The Journal reported its sources as saying the firms haven't yet determined whether any offer will go ahead and that potential financings snags or complexities with the deal could cause them to drop the plan.
The CPPIB has done business with Microsoft before, notably a deal that closed last week that saw the software giant buy Internet voice and video conferencing firm Skype for US$8.5 billion. The CPPIB was a major investor in Skype and made an estimated $1.09 billion when it was sold.
California-based Yahoo has struggled in the fast-moving Internet market, losing ground to competitor Google (NASDAQ:GOOG) and reporting lacklustre results for the July-September period. The company abruptly fired CEO Carol Bartz last month despite cost-cutting measures imposed by Bartz that helped boost Yahoo's earnings after stripping out one-time gains.
After subtracting ad commissions, Yahoo's third-quarter revenue stood at $1.07 billion — a five per cent drop from the same time last year.
Yahoo famously rejected a US$47.5-billion bid by Microsoft in 2008, and after Microsoft walked away Yahoo shares began a long decline that has seen them lose about half their value.
Other suitors that have expressed an interest in Yahoo include Alibaba Group, a Chinese Internet giant in which Yahoo holds about a 43 per cent stake.
The CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. It invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. As of June 30, the CPP Fund totalled $153.2 billion.