The Hindu Business Line : UK’s Xchanging to take 75% in Cambridge Solutions

Xchanging Plc, a UK-based business process outsourcing firm, is acquiring 75 per cent stake in Cambridge Solutions Ltd, a Bangalore-based BPO and IT services provider.

Xchanging will pay about £83 million in cash and stock to majority shareholders Scandent Holdings Mauritius Ltd and Aon Corp as part of the deal.

Scandent Holdings Mauritius Ltd held 61.35 per cent stake in Cambridge Solutions, while Aon Minet Pension Scheme held 15.71 per cent. Reliance Capital Trustee Co Ltd held 4.27 per cent in Cambridge as of June 30, 2008. The Scandent Group had bought stake in Cambridge Solutions, which was a $230 million back-office arm of Chicago insurer Aon Corp, in December 2004.

The acquisition of majority stake in Cambridge would help Xchanging increase its offshore capabilities, besides expanding its footprint in newer geographies such as the US and Australia.

“The acquisition is complementary and would provide great growth opportunity,” said Mr Satyen Patel, Vice Chairman, Scandent Holdings. Cambridge Solutions has strong presence in the US, Australia and India, whereas Xchanging is strong in Europe.

Shares of Cambridge ended at Rs 59.40 Friday at the Bombay Stock Exchange.

Xchanging said it expects the acquisition to add to earnings before one-off costs in the first full year after completion. It expects the deal would generate returns in excess of Xchanging’s cost of capital from 2010 onwards.

FTSE-listed Xchanging will pay about £45 million in cash and issue 15,249,998 shares to shareholders of Cambridge. Further, it will make an open offer to acquire up to 20 per cent of shares, Xchanging said in a statement.

Any Cambridge shares acquired under the open offer would reduce the number of shares to be acquired from the major shareholders, as will any reduction in the fully diluted share capital of Cambridge in the period to completion.

The company said this will result in Xchanging owning 75 per cent of Cambridge. The acquisition is conditional on receiving the approval of Xchanging shareholders.

Mr Patel said the combined entity would have a total strength of about 9,000 people and combined annual revenue of about $1.2 billion.

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UK’s Xchanging to take 75% in Cambridge Solutions