China Asset Management-led consortium reduces iSoftStone bid
The private equity consortium seeking to privatize US-listed Chinese IT services provider iSoftStone Holdings has reduced its offer for the company following a second-quarter loss and warnings of more difficulties to come. The revised offer values iSoftStone at approximately $310 million.
According to a regulatory filing, the consortium - comprising ChinaAMC Capital Management, an alternative investment platform affiliated to fund management company China Asset Management, and iSoftStone's CEO and chairman - is now willing to pay $5.45 per American Depository Share, down from $5.85 per share.
Explaining the revised offer, the consortium cited the net loss of $1.9 million iSoftStone reported in the second quarter of 2013, compared to a net income of $3.6 million for the same period of 2012. The company has already said it expects to post a net loss in the third quarter.
Operating cash flow has also been worse than expected, while total debt has jumped from $59 million to $155.5 million over the three months to June. ISoftStone's debt now stands at 4.1 times EBITDA for the 12 months ended June 2013, which means the costs of future financing efforts will increase.
Tianwen Liu, the CEO and chairman, is expected to roll over his equity into the acquisition vehicle. As of March, he held approximately 11.7% of the company.
China Everbright, which led a Series C round of investment in iSoftStone worth $65 million in 2010, has joined the buyer group alongside three other entities, Accurate Global, Advance Orient and CSOF Technology Investments.
The company's largest shareholders are Fidelity Asia and AsiaVest Partners, with 14.4% and 13.4%, respectively. AsiaVest provided the company's $14 million Series A round in 2005 alongside Infotech Pacific Ventures. Both firms also participated in the $45 million Series B two years later, which saw the arrival of Fidelity and Japan's MVC Corporation.
The company went public in December 2010, raising $141 million.
ISoftStone was founded in 2001 and provides IT services and solutions and business process outsourcing services to companies in China, North America, Europe and Japan, including 89 members of the Fortune 500. iSoftStone posted a net income of $22.1 million in 2012, up from $19 million the previous year, as revenues grew 34% to $381.1 million.
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