Blackstone consortium reduces Pactera MBO offer
A consortium led by The Blackstone Group has made a definitive offer for Pactera Technology International that values the US-listed tech outsourcing firm at approximately $600 million. Existing investor GGV Capital is also participating in the bid alongside company management.
According to a regulatory filing, the consortium is offering $7.00 apiece for all outstanding American Depository Shares (ADSs), which represents a 33% premium to the May 17 closing price, when the original offer was made.
The group was initially willing to pay $7.50 per share. The adjustment reflects weaker than expected financial performance by Pactera, which has since made two downward revisions to its revenue and net income projections for the 2013 fiscal year.
EBITDA is estimated to have declined 38% year-on-year and 34% year-on-year in the first and second quarters of 2013. EBITDA for the 12 months to June was $66 million, compared to $80 million for the 2012 fiscal year.
The consortium also noted that the global financing market has become more volatile as evidenced by the significant expansion in yields.
The transaction will be financed through a combination of equity provided by Blackstone, roll-over equity from GGV and company management, and third-party debt. Bank of America Merrill Lynch, Citigroup and HSBC are among the lenders that have agreed to underwrite all of the debt financing.
Pactera was formed last year through a merger between HiSoft Technology International and VanceInfo Technologies. The company provides business and IT consulting and outsourcing services to a range of multinational clients through a network of locations in China, the US, Europe, Australian, Japan, Singapore and Malaysia.
It reported a net income of $3.3 million in 2012, down from $18.4 million the previous year as a substantial jump in revenue - from $223.1 million to $358.6 million - failed to offset rising costs.
A total of 10 private equity-backed take-private deals for US-listed Chinese companies have been completed in the last two years, five of them in the last six months alone. A further 12 deals are still in process.
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