Tuesday, July 1

UK BPO offers to buy Cambridge for $250m

Global business may be facing a slowdown, but India’s M&A counter is buzzing with activity. BPO or hospitality, the India Story still rocks

Javed Sayed & Boby Kurian NEW DELHI/BANGALORE

XCHANGING, a London-based 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 sell-out at the offered price. The $1-billion Xchanging, listed on FTSE, has offered Rs 82 per share to Cambridge promoters pegging the company’s valuation at Rs 913 crore (around $230-250 million), banking sources close to the Indian company said.
While a block of promoters including 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 along with ex-McKinsey CEO Rajat Gupta reportedly feel that the bid undervalues the company. Sources said 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 holds a little over 18% stake in the Bangalorebased company. When contacted, Vangal offered no comment. Patel
could not be reached at the time of going to the press, while an email query to Cambridge did not elicit response.
Cambridge draws the bulk of its revenue from BPO and small platform IT services play. 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 valuing the stock at over Rs 130, but presents a significant premium on the prevailing share price. Cambridge stock closed marginally higher at Rs 57.05 on BSE on Monday.

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Vangal team feels ‘intrinsic’ value missed
THE stock has climbed up from a low of Rs 34.60 in March but is still way off the Rs 135 level in August last year. 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 offered price when Carlyle’s higher offer was rejected over valuation differences.
Carlyle, which attempted a buyout deal along with 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,” he said.

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