eBay Inc. has successfully completed the previously announced sale of its Skype communications unit in a deal valuing the business at $2.75 billion (USD).
The investor group (led by Silver Lake includes Joltid Limited and certain affiliated parties, the Canada Pension Plan Investment Board (CPPIB) and Andreessen Horowitz) now controls an approximate 70 percent stake in the company.
Leading up to the completion of the sale, the investor group led by Silver Lake, which had previously entered into a definitive agreement to acquire a majority stake in Skype from the company, reached a settlement agreement with Joltid Limited and Joost N.V. that gives Skype ownership over all software previously licensed from Joltid and ends all litigation currently pending against the investor group and eBay at the closing of the acquisition.
As part of the settlement agreement, Joltid and Skype founders Niklas Zennström and Janus Friis joined the investor group, contributing Joltid software and making a significant capital investment in exchange for a 14 percent stake in Skype.
As a result, Silver Lake and other investors including Andreessen Horowitz and the CPPIB, together hold 56 percent of Skype and eBay will retain 30 percent.
The CPP Investment Board is a professional investment management organization based in Toronto. It stated purpose is to invest the assets of the Canada Pension Plan in a way that maximizes returns without undue risk of loss. Canada's Chief Actuary estimates that CPP contributions will exceed annual benefits paid through to the end of 2019. Thereafter a portion of the CPP Fund's investment income would be needed to help pay CPP benefits.
The CPP Fund ended the second quarter of fiscal 2010 on September 30, 2009 at $123.8 billion compared to $116.6 billion at the end of the first quarter on June 30, 2009. The $7.2 billion increase in assets after operating expenses this quarter consisted of $5.4 billion in investment income, reflecting a 4.6 per cent rate of return, and $1.9 billion in CPP contributions not needed to pay current pension benefits.
The CPP Investment Board was incorporated as a federal Crown corporation by an Act of Parliament in December 1997 and made its first investment in March 1999.
eBay received approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million. The company retained an approximately 30 percent equity investment in Skype. The company also purchased senior debt securities with a face value of $50 million as part of a Skype debt financing.
“Skype will be well positioned to move forward under new owners with ownership and control over its core technology,” said eBay Inc. President and CEO John Donahoe, in a release. “At the same time, eBay continues to retain a significant stake in Skype and will benefit from its continued growth. We look forward to closing the deal and focusing on growing our core ecommerce and payments businesses.”
Silver Lake Managing Director Egon Durban added: “We are very pleased to have the litigation resolved. We remain confident in a great future for Skype, and we look forward to working with Niklas, Janus and the other investors as partners to help the company achieve its full potential.”
The investor group will no longer include Index Ventures, which has withdrawn from participation. Commenting on its decision to withdraw, Danny Rimer of Index Ventures, said: “We are pleased that Skype will now be able to put litigation behind it, and we wish Josh Silverman, his team and the Skype investors well in continuing to grow a great business. Although Skype has the potential to be a great investment, the deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction.”
eBay was founded in 1995 in San Jose, CA, and grew to include other online transaction portals such as PayPal and StubHub.