TCS to buy Citigroup Global Services for $505mn

Tata Consultancy Services (TCS) signed an agreement with Citigroup Inc to acquire its captive BPO-Citigroup Global Services (CGSL) for $505 million (around Rs 2,424 crore) in an all-cash transaction. In addition to the sale, Citi has signed an agreement with TCS to provide, through CGSL, process outsourcing services to Citi and its affiliates in an aggregate amount of $2.5 billion over a period of 9.5 years.

The acquisition broadens TCS’s portfolio of end-to-end IT and BPO services in the global Banking and Financial Services (BFS) sector.TCS has provided IT services to Citi since 1992 and is currently one of the largest IT services partners for Citi, delivering IT and business processing outsourcing services to Citi across its operations in North America, Europe, India, Japan, Singapore and the rest of Asia Pacific.The parties expect to close the transaction in the fourth quarter of 2008. Merrill Lynch acted as advisors to TCS in this transaction.

VoiceStream buys stake in Helios Outsourcing

Scotland- based VoiceStream group of companies has acquired 75 per cent stake in the Chennai-based firm Helios Outsourcing. The $25 million (around Rs 104 crore) VoiceStream will invest around $3 million (Rs 12.5 crore) to develop Helios as India' niche outsourcing outfit and grow the business to $85 million (around Rs 354 crore) in three years time. The VoiceStream with its majority stake in Helios will have three of its directors onto the board of the company. Helios Outsourcing is a privately held corporation created in conjunction with several companies based in the UK, the US and Australia to provide offshore outsourcing services to them.

iGATE divests its professional services biz

IT and BPO services provider iGATE Corporation has decided to divest its Professional Services business. The divestiture will occur through a sale of the business or through a tax-free spin-off of the business to iGATE shareholders.

Commenting on the divestiture, Sunil Wadhwani and Ashok Trivedi, co-founders of iGATE, said: "This separation is a logical next step for the company. Our board has reviewed the divestiture and believes it will benefit our shareholders, employees and customers."They pointed out that the Global Solutions and Professional Services businesses operate in different markets with varied business models.

"The divestiture will better position each business to benefit from their growth opportunities. In addition, the shareholders of iGATE will benefit from the increased clarity of being a focused offshore services company. The demand for offshore IT and BPO services continues to grow at a rapid rate," they added.

In accordance with generally accepted accounting principles (GAAP), the company's historical and future financial results will now reflect the Professional Services business as discontinued operations, effective beginning as of January 1, 2008.iGATE has retained Credit Suisse Securities (USA) LLC to assist with the divestiture.

Read more in The Business Standard article.

Dell may sell its BPO biz

Intelenet and Blackstone seem to have joined the race to acquire Dell’s non-US BPO business, which is on the block.Interestingly, even as Dell maintains that it was not contemplating any such move, sources said that Intelenet (which was recently acquired by Blackstone) and Blackstone itself as a standalone buy-out fund have evinced interest in acquiring the unit. Besides, these two, the other names going around in the market are Wipro and Accenture which have shown interest to acquire the PC makers unit.

Sources said the world’s second-largest PC maker has put its contact centres across India, Philippines, El Salvador in South America and Canada on the block. The valuation of the business could be anything upwards of $3 billion, sources said.

Read more in The Times of India article.

Genpact beats Firstsource to bag Citi BPO deal

After many a false alarm and multiple rounds of negotiations, the sale of Citigroup’s captive BPO operations has finally been concluded with Genpact winning the final bid in a closely-run race with Firstsource Solutions. The transaction is the first such sale of a large captive BPO and sets the precedent for other captive managements that were closely following the process. In terms of transaction value, it is the largest deal in the business process outsourcing segment.

The deal was reportedly done for $630 million with Genpact getting close to 90% in the 10,000-strong operation. The last round had seen some tense moments with the Firstsource turning out to be the dark horse and entering a bid higher than that of Genpact. Genpact was tipped to be the favourite all along, and Firstsource was not expected to be serious contender, more so because of its $330 million acquisition of US-based MedAssist barely a few months ago.

The Firstsource bid was around $100 million more than that of Genpact and although Citi was keen on doing the deal with Genpact, it was caught in a bind over the bids. ET had earlier reported that Citigroup had asked Genpact to match the bid put in by Firstsource. According to sources, the Genpact management considered the proposition but ultimately decided against it. The final deal was structured with Genpact agreeing to a higher bid but with a larger equity holding in the BPO, investment banking sources said.

Read more in The Economic Times article.

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Citigroup PE in race for group BPO subsidiary

Private equity player Citigroup Venture Capital (CVC) is learnt to have entered the race for buying Citigroup’s BPO arm — Citigroup Global Services. Sources in the industry say BPO majors Genpact and WNS Holdings and PE firm CVC are the final three players who are interested in the transaction. While NYSE-listed Genpact is believed to be as the front-runner in the deal, CVC may benefit from being part of the Citigroup family.

Citigroup has put its captive BPO outfit, Citigroup Global Services, on the block for some time but valuation of the deal and the lack of commitment of future business from Citigroup is making the transaction protracted.

While valuation was earlier learnt to be hovering around $750-800 million, sources say it has now come down to $600 million. The captive is expected to report revenues of about $200 million this year. This means a valuation of three times its revenues.

Read more in The Economic Times article.

Genpact leads pack in race for Citi BPO

An end to the long search for Citigroup BPO’s buyer finally seems to be in sight. Genpact is said to be ahead in the race for the BPO. The decision is expected by the month end. Firstsource and WNS also remain in contention, according to sources.

According to sources, the final valuation will depend on a number of parameters, including the number of years for which Citigroup is willing to give the BPO-committed business. It is currently looking at giving a contract for five years.

However, a final decision is yet to be taken. While the valuation being quoted in industry circles is around $850 million, it could be higher or lower depending on how long the contract would be. Sources also indicated the payment for the deal is likely to be a mix of cash and shares in the winning company.

Read more in The Economic Times article.

EXL readies for European buy

EXL Services, a leading business process outsourcing (BPO) company, is on an expansion spree to cater to its US and UK clients. It is planning to acquire a financial BPO outfit in eastern Europe for about of $15 million (around Rs 60 crore). Plans are also afoot to set up another BPO unit in the Philippines, primarily to expand its voice portfolio in the region, for which it will invest around $7 million (around Rs 28 crore).

Rohit Kapoor, president and COO, EXL Services, said, “We are planning to set up a 500-seat facility in the Philippines within the next 4 to 6 months and the centre will primarily expand our voice services for the existing set of our US clients.”

Also keen to add an operating BPO or captive unit in eastern Europe in the next 12 months, EXL feels the cost of acquiring an agent organically is much higher at $20,000 a year compared with $5,000 a year in India. “A running business should give us a readymade clientele and business know-how. We are eyeing companies with revenues of around $10-25 million,” said Kapoor.

The banking, financial services and insurance (BFSI) sector, which contributes nearly half of EXL’s revenues, clearly remains a key buyer of the company’s outsourcing services in the UK, with companies driven to reduce their costs further and skills shortages through outsourcing.

Read more in The Business standard article.

Apollo acquires Zavata

Apollo Health Street, a global healthcare outsourcing arm of the Apollo group, on Thursday announced the acquisition of Atlanta-based BPO and enterprise support solutions company, Zavata Inc, for Rs 697 crore.

"The fourth acquisition for Apollo Health Street and the second in the US provider space, it strengthens AHS's position as a leading provider of outsourcing solutions to the healthcare industry," Apollo Chairman Prathap C Reddy said.

While the Bank of India and Barclays Capital had structured a debt to the tune of Rs.550 crore, the rest would be from internal generation for the acquisition, he said.

It also makes the combined organisation the largest focused healthcare BPO organisation in the country with a significant IT business, he said.The combined oganisation will have more than 100 customers and over 2,500 employees spread across multiple locations in the US and in India.The company was coming up with a back office at Chennai, which would employ 400 persons initially, which would go upto 2,000, he said.

Read more in The DNA Money article.

Firstsource acquires MedAssist for $330 mn

Mumbai-based Firstsource Solutions, a pure-play business process outsourcing provider, has acquired US-based MedAssist Holding for $330 million (Rs 1,353 crore).The deal is subject to regulatory approval under the US health services research (HSR) statute.It is the second-largest acquisition after Wipro bought out Infocrossing for about $600 million.

Firstsource has raised a debt of $275 million at 2.5-3 per cent above the LIBOR (London Inter-Banking Official Rate) for a five-year term. The balance $55 million will be paid through internal accruals. The company has a cash reserve of $80 million (around Rs 328 crore).

MedAssist is a debt-free company with a top line of $99 million. Its EBITDA margins are in the range of 22-24 per cent.

MedAssist, headquartered in Louisville, Kentucky has 1,400 employees and is a pan-American provider of revenue cycle management services to the healthcare industry. It has over 800 clients, including hospitals, large physician groups and alternate site providers.

Read more in The Business Standard article.

Firstsource to acquire MedAssist Holding Inc

Business process outsourcing service provider Firstsource Solutions has entered into an agreement to acquire US-based healthcare company MedAssist Holding, Inc for $330 million.

The deal is subject to regulatory approval under the US HSR (Hart-Scott-Rodino Anti Trust Improvements) Act.As per the terms of the agreement, there would be no change in the management of MedAssist and employees would continue in their current jobs, Firstsource said in a filing to the Bombay Stock Exchange.

MedAssist has 1,400 employees and is a provider of revenue cycle management services to the healthcare industry across America. This includes eligibility services, receivables management services and post-default collections services for healthcare providers.

Firstsource, which already has a presence in the US healthcare BPO space on the insurance company end, would now enter the hospitals segment of healthcare BPO services after the acquisition.MedAssist has over 1,000 clients. Its revenue for year ended 31 December 2006 was $99 million.

Read more in The Livemint article.

Firstsource frontrunner for $300mn MedAssit buy

A leading Indian pure-play business process outsourcing (BPO) firm, Firstsource Solutions, has emerged as the frontrunner in the quest to buy US-based healthcare player MedAssist. The deal size, say sources, is close to $300 million (around Rs 1,200 crore). If it takes place, the acquisition will be one of the largest overseas aquisitions after Wipro's buyout of Infocrossing for around $600 million, and the largest in the BPO space.

Sources close to the deal say there's one more serious contender in the race for MedAssist which has revenues of $90-100 million and provides provides services in patient services, eligibility services, patient financing and healthcare collections. It has around 1,400 employees and 950 healthcare providers as clients.

Firstsource is also rumoured to be in the race to acquire Citi's BPO unit after the first round of bidding. The sale of the BPO business, being run by Citigroup Global Services (formerly eServe), is expected to fetch Citi around Rs 3,200 crore. Other bidders include WNS and Genpact.

During its initial public offering (IPO) in end-January, the Firstsource management had indicated that the company intends to use the net proceeds of the issue to make acquisitions, set up new facilities, repay loan and for general corporate purposes. Out of the proceeds of the IPO, the company plans to spend approximately Rs 180 crore on acquisitions.

HCLT, Carlyle out of race for Cambridge stake

Global private equity fund Carlyle and Indian software services major HCL Technologies are reported to have dropped out of the race to acquire a 48 per cent stake in Cambridge Solutions – a Bangalore-based Rs 1,200-crore IT and BPO services provider.

According to sources, the two firms opted out of the Rs 650-crore deal due to price differences with a group of promoters who are looking at exiting.

Meanwhile, a senior executive of the company said two other global PE funds had evinced interest in the stake. “One of them is from the US and the other from Europe. Both are blue-chip PE funds and one of them is expected to align with Ramesh Vangal, who holds 13 per cent in Cambridge,” the executive added.

Read more in The Business Standard article.

Genpact, 2 others in race for Citi BPO unit

Citigroup has shortlisted three bidders for its business process outsourcing (BPO) unit after the first round of bidding.

The sale of the BPO business, run by Citigroup Global Services (formerly e-Serve), is expected to fetch around Rs 3,200 crore for the group. At this price, it will be the largest deal in the domestic BPO space.

The shortlisted bidders are Firstsource, WNS and Genpact, said sources close to the development. Others who had expressed initial interest, including IBM, Automatic Data Processing (ADS), Infosys, EDS, Capgemini and private equity players such as Blackstone and General Atlantic, are no longer in the race.

The largest major deal in the BPO space so far was when Blackstone recently bought Intelenet from Barclays and HDFC for Rs 840 crore.

Read more in The Business Standard article.

General Atlantic invests $60 mn in IBS Software

Private equity (PE) investor General Atlantic Llc. (GA), headquartered in New York, has stepped up its pace of dealmaking in the country. It has closed three deals worth more than $175 million (about Rs744 crore) in the first seven months of the year, including the $60 million investment in Thiruvananthapuram-based transportation and logistics software firm IBS Software Services that was announced on Wednesday. The change of pace, in terms of the number of deals, is significant when seen in the context of the six deals the $17 billion PE firm had concluded till December 2006, five years after it started investing here in 2002.

IBS marks GA’s ninth investment in India and its fourth in the information technology services sector. The firm has invested more than $700 million in the country till date and its largest investment here has been $250 million in Gurgaon-based business process outsourcing (BPO) firm Genpact Ltd in 2004 for a 30% stake. The BPO, which was spun off from General Electric Co., will make an initial public offering (IPO) on the New York Stock Exchange soon and expects to raise $731 million. GA is expected to partially exit Genpact at the time of the listing.

The PE investor has taken a minority stake in IBS Software Services, but the percentage was not disclosed. IBS Software Services plans to use the funding to boost its sales and marketing teams, increase its business consulting services and make two acquisitions in the US or Europe.

Read more in The Livemint article.

FirstSource in talks to buy MedAssist: Sources

India's seventh largest BPO, FirstSource seems to be on a shopping spree. According to sources, Firstsource is likely to bid for US-based outsourcing firm MedAssist - that provides cash management solutions to the US healthcare industry, reports CNBC-TV18.

MedAssist's financials are not known, as it is a private company. But sources say the deal value could be close to USD 300 million. MedAssist has 1,400 employees and over 900 clients.

For Firstsource, which listed in February this year, the growth strategy seems to be acquisition driven. In the last five years, it has acquired six companies, spending a total of USD 146 million. They are small acquisitions but they have boosted growth. FirstSource revenues have grown an average 82% per year over the last four years.

Read more in The Moneycontrol article.

Infosys in global BPO deal with Philips

Infosys Technologies on Wednesday signed a multi-million dollar outsourcing contract with Netherlands' Royal Philips Electronics. As part of the agreement, Philips will enter into a multi-year contract with Infosys BPO to provide finance & accounting services and the processing of purchasing orders.

Infosys will also acquire three shared service centers located in India, Poland and Thailand from Phillips.

The contract is amongst the largest finance & accounting BPO engagements from India and will expand Infosys' global network, particularly strengthening its European operations, Infosys said in a notice to NSE.

Read more in The Economic Times article.

TCS close to acquiring 2 firms

The $4.3 billion Indian IT services provider, Tata Consulting Service (TCS), is close to acquiring two IT firms in Latin America.

The estimated value of these two firms is around Rs 200 crore. TCS, with a considerable presence in Latin America, has completed due diligence of the targeted companies.

Sources close to the development said that TCS was looking at one business process outsourcing (BPO) company and an IT services company.

These companies have a headcount of nearly 100 each. These acquisitions would enable TCS to outsource various business activities at much lower cost compared with other international locations.

TCS announced some time ago that it was expanding operations in Latin America by setting up its first global delivery centre (GDC) at Guadalajara in Mexico.

WNS, Accenture join race for Citi`s BPO arm

The race for Citigroup Global Services, the business process outsourcing arm (BPO) of Citigroup is hotting up with the entry of the BPO firm WNS and consultancy firm Accenture.

Sources close to the development said these were the latest entrants into the fray. The list of suitors includes IBM, Automatic Data Processing (ADS), Infosys, EDS, Genpact, Capgemini and private equity players such as Blackstone and General Atlantic. A Citigroup spokesperson declined to comment.

Although there was no official confirmation on the impending sale of Citigroup’s business processing arm, sources in the know said Citi might receive Rs 3,000 crore from divesting this non-core area of its business.

Sources said Citigroup might sell 80 per cent stake in the BPO firm currently and pull out at the time of listing after divestment. Citigroup might induct a strategic partner for the BPO arm, they added.

Citigroup Global Services, which changed its name from e-Serve in November, employs close to 8,000 people in Mumbai and Chennai.

Read more in The Business Standard article.

ICICI, Spanco take over GTL BPO for Rs 253 cr

Mumbai-based IT company GTL has entered into an agreement with ICICI Bank and Spanco Telesystems to lease out its BPO assets for 25 years for Rs 253 crore. GTL has two BPO facilities located in Navi Mumbai and Pune with a combined capacity of 1,500 seats. In terms of area, these two units have a combined capacity of over 1.5 lakh sq ft. According to sources close to the development, the deal is likely to be announced on Wednesday.

Sources in the know told ET that despite GTL putting its BPO arm on the block, the deal would only involve the leasing out of the facilities. “This is not an outright sale, but the leasing of the BPO assets. The companies have agreed to this system as GTL does not want to let go of the real estate where its BPO units are located.

At the same time, as reported first by ET, GTL is also close to signing a deal with France Telecom for sale of its IT business. The deal, which is slated to be announced shortly is estimated at Rs 250-300 crore. (The acquisition will be made through France Telecom’s business arm, Orange Business Services). GTL has also put its ERP businesses on the block and is looking for suitors for it.

Read more in The Economic Times article.