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.

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.

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.

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.

Citi to exit, captive BPO units no longer attractive

The captive outsourcing story is turning sour .. or so it appears with the latest market buzz that Citigroup is on its way to pull out of its local business process outsourcing (BPO) unit Citigroup Global Services (formerly eServe).

While Citigroup continues to maintain that "the bank's policy is not to respond to market speculation," industry sources say "it makes logical sense for Citigroup to exit the business since it's not core to its operations".

The BPO currently has close to 8,000 people spread over two centres in Mumbai and Chennai. Some of the names floating to acquire the business include IBM, Automatic Data Processing (ADS), Infosys, EDS, Genpact, Capgemini and private equity players like Blackstone and General Atlantic.

When contacted, Genpact denied comment saying that it is in silent period. While IBM and Capgemini, too, maintained the no-comment stance, a senior Capgemini official, on condition of anonymity, said: "We have studied Citi Global services, it seems to be a decent company and has a good set up." The official, however, was concerned about the valuation of the Citi's BPO arm, which market rumours pegged at $1-1.2 billion.

Read more in The Business Standard article.

IBM, ADP, Genpact, Infy in race for Citi’s BPO biz

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal.

According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm. According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

Read more in The Economic Times article.

Citi to invite bids for BPO arm stake

Citigroup has opened talks with prospective bidders, including IBM Corp. for selling a strategic stake in its Mumbai-based captive business process outsourcing (BPO) arm Citigroup Global Services Ltd, earlier e-Serve International.

While additional details of the stake sale plans weren’t available, based on current annual revenue estimates ranging from $300 million to $400 million (Rs1,230 crore to Rs1,640 crore), industry sources estimate the unit could be valued at over $1 billion.

Citigroup India chief executive officer Sanjay Nayar declined to comment on the development, saying the bank’s policy is not to respond to market speculation, but people familiar with the development and who didn't want their names used said, “Citi has started feeling the market for a strategic stake sale. The process has started and it may take a while before concluding the deal.”

In March 2004, IBM took over Bharti’s information technology operations in return for assured revenues of up to $750 million over a 10-year period. “There could be a similar arrangement whereby IBM would run Citi’s BPO operations for a fee. In addtion to that, it could pick up a strategic stake (in Citigroup Global Services),” this person said.

Read more in The Livemint article.