CANADA'S PUBLIC PENSION 
CPPIB makes big investments in technology companies

DAVID MILSTEAD

GLOBE AND MAIL

INSTITUTIONAL INVESTMENT REPORTER

PUBLISHED NOVEMBER 8, 2021

Canada Pension Plan Investment Board is part of a six-member investment group that will pay US$12-billion to buy publicly traded computer-security company McAfee Corp.

CARLO ALLEGRI/REUTERS

Canada Pension Plan Investment Board is making two technology bets as part of multibillion-dollar deals announced Monday.

CPPIB is part of a six-member investment group that will pay US$12-billion to buy publicly traded computer-security company McAfee Corp. MCFE-Q -0.16%decrease

, known for its pioneering virus-protection software. CPPIB’s share of the company is undisclosed.

Separately, CPPIB and three partners, including Ontario Teachers’ Pension Plan, are selling British satellite company Inmarsat PLC to a California-based competitor Viasat Inc. for US$4-billion, with US$3.15-billion of the price coming in Nasdaq-traded Viasat shares. CPPIB and Teachers each own 25 per cent of Inmarsat, which will give them each a little less than 10 per cent of the combined public company.

The two deals have strong consumer-tech components. While Viasat has a commercial and government division, it also provides broadband and voice-over-internet services to consumers and, like Inmarsat, has a business providing in-flight internet and entertainment to airline passengers. McAfee in July shed its Enterprise division to become a pure-play consumer cybersecurity company.

In a joint statement on Inmarsat, CPPIB, Teachers and partners Warburg Pincus LLC and Apax Partners LLP said the combined company will have US$4.1-billion in revenue and 19 satellites, with 10 more on the way. The deal allows Viasat to diversify geographically, as nearly all of its revenue comes from the United States, and will allow the combined company the scale to grow faster.

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CPPIB, Teachers and the Inmarsat partners bought the satellite company in December, 2019, for US$6.5-billion, with CPPIB making a US$900-million commitment at the time. In the deal announced Monday, Viasat is also taking on US$3.4-billion in Inmarsat debt, bringing its total value to US$7.3-billion.

Reuters Breakingviews columnist Ed Cropley pointed out that Inmarsat’s 2021 profit is estimated to be below 2018 levels, “and the gradual recovery in air passenger traffic probably means more sedate growth forecasts” than the consortium expected. “Viasat is paying a higher multiple than the consortium did in 2019, despite the bleaker outlook,” he said.

Share of Viasat, which also released above-expectations earnings Monday, sunk in early trading.

McAfee was founded nearly 35 years ago by computer programmer John McAfee, who left the company in 1994 and later became infamous for his drug use, sexual exploits, alleged tax evasion and his suicide last summer at the age of 75.

Intel bought McAfee Corp. in 2011. In 2017, it partnered with buyout firm TPG to carve it out separately, and it went public in 2020. McAfee sold its Enterprise business to private-equity firm Symphony Technology this year.

The buying group, which also includes Advent International Corp., Permira Advisers LLC, Crosspoint Capital Partners, GIC Private Ltd. and a subsidiary of the Abu Dhabi Investment Authority, is paying a premium of about 22.6 per cent over McAfee’s closing share price of $21.21 on Nov. 4, the last trading day prior to media reports of a potential sale of McAfee.

The group will take on US$2-billion of McAfee debt, making the total transaction value US$14-billion

In an e-mailed statement, Geoff McKay, CPPIB’s head of North American direct private equity, said McAfee’s brand “has become synonymous with security. Coupled with the company’s strong financial profile and scalable business model, we see further potential to build on this brand, which is well suited to our long-term investment strategy.”