Vangal to up stake in Cambridge Solutions

Ramesh Vangal is in talks to buy an additional 15 per cent stake in the Bangalore-based Cambridge Solutions from other co-promoters of the IT and BPO services provider. Vangal currently holds 13 per cent stake in the company.

Vangal, who straddles businesses ranging from liquor to shipping and banking, is in talks with private equity players, including Carlyle, to pick up 15 per cent of the 46 per cent stake being held by a group of co-promoters led by Chris Sinclair, Satyen Patel and the Chandaria family.

Sinclair is the executive chairman and CEO, while Patel is the executive vice-chairman of Cambridge.

Sources close to the development said, post-acquisition, Vangal along with a PE player, will come out with an open offer for an additional 20 per cent stake.

If the open offer is fully subscribed, he will emerge as the majority shareholder, with 48 per cent stake. The entire capital outgo for the deal is expected to be in the range of Rs 650-700 crore. No official comments were available from the company.

The Cambridge Solutions stock closed at Rs 127.95, 0.5 per cent lower over yesterday's close on the Bombay Stock Exchange.

While Vangal is in talks with Carlyle for financial muscle, it is understood that a strategic player besides another fund is in the play.

According to market information, reasons for a section of promoters exiting the firm had escalated after the erstwhile Scandent Solutions acquired the US-based BPO-focused Cambridge Holdings, the holding firm of Cambridge Solutions.

"When this merger happened, the share-swap ratio was skewed towards the shareholders of Cambridge Holdings. While most investors were looking a 1.8:1 ratio, the deal was done at 2.5:1.

"This was the starting point of differences between Vangal and the other two key people, with all the three having independent veto powers. This had a snowballing effect and many critical decisions were being deferred," a key investor in Cambridge detailed.

Cambridge suffered a loss of nearly Rs 20 crore over sales of Rs 1,200 crore in FY06.

The financial results for FY07 and the decision on the strategic control are expected to be sorted out on June 19.

The company has close to 5,000 employees.