TCS to buy Citigroup Global Services for $505mn

Tata Consultancy Services (TCS) signed an agreement with Citigroup Inc to acquire its captive BPO-Citigroup Global Services (CGSL) for $505 million (around Rs 2,424 crore) in an all-cash transaction. In addition to the sale, Citi has signed an agreement with TCS to provide, through CGSL, process outsourcing services to Citi and its affiliates in an aggregate amount of $2.5 billion over a period of 9.5 years.

CGSL has more than 12,000 employees located in India and expects to generate revenues of approximately $278 million in 2008. The acquisition broadens TCS’s portfolio of end-to-end IT and BPO services in the global Banking and Financial Services (BFS) sector, said the company in its press statement.

S. Ramadorai, CEO and MD, TCS said: “This is a landmark acquisition for TCS, helping us not only acquire new capabilities in the banking domain but also underscoring the importance of our long-term, sustainable relationships with our large customers, including Citi. This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth going forward.”

N. Chandrasekaran, COO and executive director, TCS added: “The acquisition of CGSL has two immediate strategic benefits for TCS.  It gives us the ability to offer a comprehensive end-to-end, domain-led solution for business operations of large financial services institutions. It also positions us well to create banking processing platforms by integrating our products and process capabilities.”

TCS has provided IT services to Citi since 1992 and is currently one of the largest IT services partners for Citi, delivering IT and business processing outsourcing services to Citi across its operations in North America, Europe, India, Japan, Singapore and the rest of Asia Pacific.

The parties expect to close the transaction in the fourth quarter of 2008. Merrill Lynch acted as advisors to TCS in this transaction.