CalPERS to Buy Stake in Silver Lake

Silver Lake, the largest technology-focused private equity firm, has reached a deal to sell a 9.9 percent stake to the California Public Employees’ Retirement System for about $275 million, according to The New York Times.

The transaction, which values Silver Lake at about $2.75 billion, is expected to be announced today, sources told Times reporter Andrew Ross Sorkin. Over the years, Silver Lake has made investments in businesses including Ameritrade, Avaya, Business Objects, Flextronics, Instinet, MCI, Nasdaq, Seagate Technology, and SunGard.

The investment by CalPERS in Silver Lake is clearly a vote of confidence in the firm, which is increasing its presence internationally, at a time of uncertainty. CalPERS, which has been an investor in Silver Lake’s funds since 1999, has taken stakes in rival funds, among them Apollo and Carlyle.

CalPERS invests in these firms directly, not just in their funds as a limited partner, giving it access to the 20 percent of the profits and 2 percent of the fees that the firms collect from investors in their funds.

The CalPERS investment also gives the pension fund access to co-invest with Silver Lake in certain investments. CalPERS has committed to make additional investments in Silver Lake’s funds and will have a seat on the firm’s management advisory board.

At about $2.75 billion, Silver Lake’s valuation appears rich compared with some of its competitors, though it is hard to make a direct comparison because it is private and does not disclose its financial details.