China's Pactera agrees to $625m Blackstone-led take-private
Pactera Technology International has agreed to be taken private by a consortium led by The Blackstone Group that values the NASDAQ-listed Chinese tech outsourcing firm at approximately $625 million. Existing investor GGV Capital is also participating in the bid alongside company management.
According to a regulatory filing, the consortium will pay $7.30 per American Depository Share, representing a 39% premium to Pactera's closing price on May 17, the last trading day prior to the bid being made. The initial offer was $7.50 per share but this was reduced to $7.00 in September after Pactera 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.
Now that the increased offer has received board approval, it will be put to a shareholder vote.
According to Pactera's 2012 annual report, GGV held a 7% stake in the company, while senior management, led by Chris Chen, the non-executive chairman, and Tiak Koon Loh, the CFO, held 10.4% between them. Fidelity Investments and hedge fund Lone Pine Capital owned 9.4% and 9.1%, respectively.
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 will act has lead arrangers for 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. A further 12 deals are still in process and Pactera is the eighth of these to receive board approval.
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