Carlyle tops Cambridge bid

BANGALORE/NEW DELHI: A Joint bid by private equity major Carlyle and serial entrepreneur Ramesh Vangal is set to snap up Cambridge Solutions, one of the largest listed BPO companies, pipping rival bidders like EDS, Apollo and HCL to the deal. Sources said Carlyle is expected to buy about 42% of the promoter stake that is on the block for about $170 million.

The acquisition will unveil the Carlyle Group’s biggest investment in India till date. The PE major is joining hands with Mr Vangal, a co-founder and the largest individual shareholder in Cambridge with 18% stake, in effecting a buyout, sources added.

The joint bid would control around 60% stake valued at around $250 million in the acquired company, which carries an enterprise valuation of $400 million. This will make the transaction the second largest in the domestic BPO space after Oak Hill and General Atlantic took 60% stake in Genpact, valuing the former General Electric company at $500 million.

Sources said Carlyle’s move to buy into Cambridge, which has substantial revenue locked up in the insurance processing domain, could unleash synergies given its rather large exposure to the insurance sector in the US. Mr Vangal could keep his equity holding intact and play a more proactive role. Mr Vangal, however, is not likely to return to the operational structure, which he quit last year reportedly over differences with the existing promoters.

The deal could be unveiled in the next few weeks after the formalities are completed. Cambridge Solutions declined comment. The promoters exiting Cambridge Solutions (formerly Scandent Solutions) include ex-McKinsey honcho Rajat Gupta, former Pepsico chairman Chris Sinclair, US-Canadian Bronfman family of Seagram fame and the Chanderia family.
Earlier this year, the promoters had mandated Lehman Brothers to find a suitor for their holding. It is learnt that
the bulk of the 59.15% promoter holding, including that of Mr Vangal, is jointly held in a Mauritius entity which is being unbundled.

Almost two-thirds of Cambridge’s Rs 1,200-crore revenue comes from high-end BPO operations spread across the US, India and Europe. It has a strong presence in the lucrative insurance processing domain, with around 2,000 of its total 4,500 employees located in the US.

Mr Vangal, along with Rajat Gupta and others, set up Scandent Solutions, a broad-based IT services company, more than five years back. Scandent bought Cambridge Integrated Services, a global outsourcing firm and part of US-based Aon Corporation, for $125 million in 2004. One year later, Scandent Solutions merged with Cambridge Services to form Cambridge Solutions.