Blackstone Shops Pactera to Potential Buyers
February 01 2016 - 1:20AM
Dow Jones News
HONG KONG—U.S. private-equity firm Blackstone Group LP is
shopping one of its biggest assets in China, information technology
outsourcing firm Pactera Technology International Ltd., for up to
$1 billion, according to people familiar with the situation.
Blackstone has hired Morgan Stanley to run a sale process for
the company after receiving unsolicited expressions of interest
from buyers, they said. Morgan Stanley has sent out initial
information, known as a "teaser," about the company to prospective
buyers, according to these people. The sale process is still in an
early stage and it could take several months before a deal is
reached.
The sale process begins less than two years after a
Blackstone-led consortium completed a more than $600 million buyout
deal for Nasdaq-listed Pactera in March 2014.
The deal, if completed, would mark an exit for one of
Blackstone's biggest private equity deals in China. The Pactera
investment fits Blackstone's preferred investing model, giving it
control of the company. The planned sale is also an example of how
China's market turmoil is encouraging some owners of assets to
pursue selling assets rather than face the uncertainty of launching
an initial public offering.
Potential buyers for Pactera could pay between $800 million and
$1 billion for the company and include a range of financial or
industry buyers, according to the people familiar with the
situation. Some of those potential buyers may want to list the
company domestically or merge Pactera with an already
domestically-listed Chinese companies, they said. A paucity of
established Chinese technology-related companies trading on the
country's domestic exchanges have boosted multiples for businesses
listed in China with a track record.
Beijing-headquartered Pactera and its subsidiaries provide IT
outsourcing and consulting services to multinational and Chinese
corporations. Pactera reported revenue of $713 million in 2014 and
has tried to build up its roster of domestic Chinese clients as
spending by local companies on IT has grown. It was formed from the
merger of VanceInfo Technologies Inc. and Hisoft Technology
International Ltd. in 2012.
Blackstone is expected to make a profit from its investment in
the Chinese company, despite declining margins at Pactera. The
company's adjusted operating margin fell below 3% in the first nine
months of 2015 from 8.7% in the same period of 2014, according to a
December Moody's statement when it downgraded Pactera's corporate
family rating from B1 from Ba3. The fall in its operating margin
was driven by higher wages in China and weaker economic performance
in Europe where some of its clients operate, Moody's said.
Pactera has continued to be active in deal making. Pactera on
Jan. 13 sealed a deal to buy Blue Fountain Media, a New York
digital branding agency, for an undisclosed amount.
Blackstone established an Asia presence when it set-up a Hong
Kong office in 2007. That same year, China's sovereign-wealth fund
China Investment Corp. invested $3 billion in Blackstone ahead of
its initial public offering.
Last year, Blackstone hired Zhang Liping, a senior Credit Suisse
Group AG banker, to head its operations in China.
Write to Rick Carew at rick.carew@wsj.com and Kane Wu at
Kane.Wu@wsj.com
(END) Dow Jones Newswires
February 01, 2016 01:05 ET (06:05 GMT)
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