Private equity player Bain Capital Partners on Thursday agreed to buy 30 per cent stake in Genpact for $1 billion, valuing India’s largest business process outsourcing and technology company at $3.29 billion (Rs 18,095 crore). The sale price of $14.76 a share for 68 million common shares is a 14 per cent discount to Genpact’s share price of $17.15 as of August 1 on the New York Stock Exchange.
Bain will nominate four directors on the company’s board. Investors General Atlantic and Oak Hill Capital Partners will reduce their stake from 40 per cent to five per cent each.
Oak Hill and General Atlantic acquired 60 per cent of the company for $500 million in 2004. Both investors reduced their stake further to 40 per cent in 2010 through a secondary sale on the New York Stock Exchange. “Bain’s entry into the company will give an orderly exit to GA and Oak Hill. It will also help reduce the share overhang and also adds credibility to the company. It is also a vote of confidence for our business model,” said
N V ‘Tiger’ Tyagarajan, president and CEO of Genpact, on an analyst call after the company’s second-quarter results.
As part of the transaction, Bain Capital has agreed not to sell any Genpact shares for a period of two and a half years, subject to limited exceptions, and has agreed to a customary standstill.
Industry players believe a majority of large BPO players in India have investments from PE players which have been invested in these firms for five to six years. “PE interest in the sector is high, primarily because the fundamentals of the industry are in place and companies in this sector have good cash flow and are sitting on cash piles. Though the growth may have slowed, they are continuing to grow even in this environment,” said an investment banker.
“We are pleased to enter this important partnership with Genpact, which is the recognised market leader in the business process management and technology services industry,” said Bain Capital.
One of the more recent and successful exits from the BPO sector was Blackstone’s investment in Intelenet, as it got acquired by the UK-based Serco for £385 million. Blackstone’s $200 million investment in Intelenet was one of its earliest in India. The PE firm’s 66 per cent stake has been valued at $420 million.
Genpact delivers services from 18 countries around the world, including the US, where it has more than 3,000 employees. The transaction is expected to close in 2012 and is subject to the payment of a special dividend, anti-trust and competition clearances and other customary closing conditions.
“General Atlantic and Oak Hill Capital have been terrific partners for more than seven years and have been incredibly helpful in supporting our transformation from a captive business process services operation to a diversified, global leader in business process management and technology services,” said Genpact’s Robert Scott. “We are pleased that this was a successful partnership for General Atlantic and Oak Hill Capital, and we look forward to Genpact's next phase of growth,” he said.
Morgan Stanley and Citigroup acted as financial advisors to Genpact, and Cravath, Swaine & Moore LLP acted as legal counsel.