Serco finally sells BPO division to Blackstone

LONDON (Reuters) - British outsourcing firm Serco has agreed to sell its Business Process Outsourcing operation to private equity firm Blackstone for 250 million pounds ($384 million), finally offloading an asset it had struggled to sell.

Shares in the company jumped by more than 4 percent in early trading on the news, and were 2.7 percent higher at 106 pence by 0720 GMT, making it one of the biggest gainers on the FTSE mid-cap <.FTMC> index.

Serco, which bought the business from Blackstone in 2011 for $630 million, said on Wednesday the proceeds from the deal would be used to reduce net debt and was part of its strategy to focus on government service contracts instead of the private sector.

"This disposal will not only strengthen further our balance sheet but also enable us to focus on the group's five core markets," said Chief Executive Officer Rupert Soames.

"This is good news ... It is doing the right things in our view and that will show in due course. Management has never said it will be swift or smooth as the business recovers," said analyst Stephen Rawlinson at brokerage Whitman Howard.

The BPO division, which runs IT and customer services for private-sector firms from its base in India, was up for sale in November last year after the group reported a 1.5 billion pound loss but Serco struggled to find a buyer after a number of private equity firms pulled out during the process.

Blackstone said the deal represented the largest acquisition it had made in India.

Serco said the deal was expected to be completed by the end of the year and would comprise 220 million pounds in cash and a 30 million pound loan note.

($1 = 0.6518 pounds)

(Reporting by Li-mei Hoang, editing by William Hardy)