Citigroup private equity arm may sell Keane stake

Citigroup Venture Capital International (CVCI), the private equity arm of Citigroup, is understood to have begun a move to sell its 50 per cent stake in US-based software and business process outsourcing firm, Keane Inc, which employs around 12,000 people, a majority of whom are in India.

Investment banking sources say CVCI has initiated talks with a couple of private equity firms to sell its stake and the deal is expected to be completed in the next two quarters. Citigroup said it did not comment on specific portfolio holdings or actions. Keane said it was a “rumour”.

Keane reported revenues of $1 billion for 2008. CVCI holds 50 per cent stake in the firm after investing $350 million in early 2007. The remaining 50 per cent is owned by the promoters and employees. Keane was delisted from the Nasdaq Stock Exchange after it was acquired by Caritor Inc, a software solutions firm promoted by a former Wipro board member, Mani Subramanian.

CVCI’s move to exit Keane comes at a time when Citigroup is going through troubled times as credit crunch squeezes almost all major financial institutions in the United States. CVCI has been long associated with Caritor. It first invested around $15 million during 2005. During early 2007, Caritor, which had a top line of around $100 million, went on to acquire the Nasdaq-listed Keane in an all-cash deal for $854 million, through a mix of debt and equity.

The equity part was funded by an affiliate of CVCI to the tune of around $350 million, while the debt was channelled in by Citigroup Global Markets, UBS Securities, and Bank of America Securities. Post the takeover, the combined entity retained the name Keane, while Caritor Chairman and CEO Mani Subramanian became chairman and CEO.

The firm was taken private after the merger. A spokesperson for Keane said that like many software firms across the globe, the company was also facing some heat from the economic downturn. And they have had to cut jobs to some extent.The company, which counts Morgan Stanley among its large clients, said the partnership with it was growing and they were also looking at options to rope in Citigroup as a client in the near future.