Canada Pension Plan Investment Board's first direct investment in China is poised to yield huge rewards with the initial public offering of Alibaba Group Holding Ltd.
The Toronto-based C$219.1 billion (US$201.6 billion) CPPIB invested in the e-commerce company on two fronts: a $100 million direct investment in 2011; and a C$465 million commitment to a fund run by Silver Lake Management, a U.S. private equity firm that also owns a small share of Alibaba, filings show. Alibaba's valuation has risen fivefold in less than three years, according to estimates compiled by Bloomberg.
The pension fund will soon join investors including Softbank Corp. and Yahoo! Inc. in reaping gains from one of the largest IPOs ever. With Alibaba's value now estimated at $168 billion, according to analysts surveyed by Bloomberg, the direct investment alone may be valued at $525 million.
“Since we own a stake in Alibaba, I hope it prices very high,” CPPIB CEO Mark Wiseman said in a May 23 phone interview.
The Alibaba investment is part of a wider push by Mr. Wiseman to expand in China, where he sees opportunities to boost returns at the pension fund. CPPIB has 69% of its assets abroad.
Alibaba filed on May 7 for a U.S. IPO. The company and Yahoo, which is selling part of its 22.6% stake in Alibaba, might raise as much as $20 billion, estimates of its valuation suggest, topping a 2008 offering by Visa Inc. to become the largest in the U.S., data compiled by Bloomberg show.
Alibaba didn't specify the number or price of shares it will offer or what valuation it will seek.
Linda Sims, a spokeswoman for the pension fund, wouldn't confirm the amount the pension plan has invested in Alibaba. Ms. Sims said the fund made a direct investment in the Chinese company.