Tuesday, July 1
UK BPO in $250-m play for Cambridge
Xchanging, London-headquartered pure play BPO giant, is mounting a bid to acquire Cambridge Solutions in a deal valued close to $250 million. However, the promoter-shareholders at one of India’s leading BPO companies are not united on a sellout at the price offered. The FTSE listed $1-billion Xchanging has offered Rs 82 per share to Cambridge promoters pegging the company’s valuation at Rs 913 crore (around $230-250 million), bankers close to the Indian company said. While a set of promoters including the NRI Chanderia family, former Pepsico chairman Chris Sinclair and Cambridge vice-chairman Satyan Patel — who together hold 30% in the company — are learnt to be backing the offer, the company’s largest individual shareholder Ramesh Vangal and ex-McKinsey CEO Rajat Gupta reportedly feel that the bid undervalues the company. Sources said Mr Vangal may be exploring the possibility of structuring a counter offer in the next few weeks, and has not taken a decision on Xchanging’s offer. The Vangal-Gupta combine hold a little over 18% in the Bangalore-based company. While Mr Vangal offered no comment, Mr Patel could not be reached at the time of going to the press. An email query to Cambridge did not elicit response. Cambridge draws bulk of its revenue from BPO and small platform IT services. The company’s BPO operations has a major exposure in the US insurance sector, with roughly 1,600-odd employees in that country. Xchanging’s offer comes at a deep discount to last year’s Carlyle offer that valued the stock at over Rs 130, but presents a significant premium to the prevailing share price. On Monday, the Cambridge share closed marginally higher at Rs 57.05 on BSE. The stock has climbed up from a low of Rs 34.60 in March, but is still way off the Rs 135 level it touched in August 2007. According to banking sources, the Vangal faction feels that Xchanging’s offer price discounts the company’s ‘intrinsic’ value. It questions the logic of selling out at the price offered when Carlyle’s higher offer was rejected over valuation differences. Carlyle, which attempted a buyout deal along with Mr Vangal, gave up after prolonged discussions failed to strike a consensus with all the promoters on price. But, according to a source, the scenario has changed dramatically after the global slowdown, especially with the financial sector in the US bearing the brunt, impacting the business outlook of companies like Cambridge. “This is probably a reason why some promoters are seen pressing the exit button now. And with the rupee losing ground against dollar in recent weeks, there’s bound to be a limited upswing in valuation for the moment at least,” he said. The company’s total headcount is estimated at about 4,600 people. Cambridge reported Rs 1,267 crore topline in FY08 with Rs 8.79 crore loss.