Apax, Bain eyeing Genpact

Private equity giants Apax Partners and Bain Capital are in a race to buy the world's largest business process outsourcing (BPO) company, Genpact, after existing investors Oak Hill Capital and General Atlantic Partners decided to sell their 41% stake, said banking sources briefed on the matter. 

Morgan Stanley and Citigroup are advising the sellers on what might be the biggest deal in the BPO industry. The change of ownership will not affect the incumbent management which is backing the entry of new shareholders. 

US Republican Presidential candidate Mitt Romney was founder CEO of Bain Capital in 1984 and led it right till 1999. 

The transaction would value the Gurgaon-based Genpact, a poster boy of Indian outsourcing prowess and listed on the New York Stock Exchange, at $3.4 billion (Rs 18,850 crore). The deal might be clinched at prevailing market price, and not at a premium, with shares worth $1.4 billion (Rs 7,762 crore) moving to new investors. 

Bidders Apax and Bain are scouting for partners as no single player may want to write such a big equity cheque, said one of the sources mentioned earlier. Another PE investor Carlyle Grouplooked at the transaction but appears to have backed out. 

Strategic buyers like Cognizant Technology Services had looked at snapping up Genpact in the past but dropped plans to spend big bucks on a large asset with diffused shareholding. A second source did not rule out Apax and Bain splitting the large stake which is on sale. 

The buyers are unlikely to pay any premium on the current stock price and the deal won't be decided through auction. A preferred suitor or consortium may buy the shares via block deals in open market transactions within 45 days. Genpact shares ended at $15.05 on NYSE last Friday. 

The sellers, Oak Hill and General Atlantic, have been lead investors in Genpact since 2004, following their acquisition of the company from original founder General Atlantic. 

The two have been exploring ways to sell their eight-year-old investments, typical of any financial investor. Oak Hill and General Atlantic spokespersons declined to comment, while Genpact did not respond to a questionnaire emailed last week. 

The Genpact deal may be the first instance of private equity firms buying a large management-driven Indian company, without an identifiable promoter. 

Private equity, or long-term risk investors, have chased acquisitions of smaller family-run domestic companies where promoters decided to quit for lack of succession plan, or to pursue other entrepreneurial initiatives. Last year, Apax backed iGate Corp to buy out mid-tier technology services firm Patni Computer Systems from the Patni family for about a billion dollars. 

The Genpact sale comes at a time when the global back office industry, about 45% of which is based out of India, is poised for consolidation. 

A clutch of smaller BPO firms have been seeking buyers as even back-office work is now fractured across many more geographies. South East Asians nations like Malaysia andPhilippines have outlined aggressive plans to build their potential in this sector. TOI recently reported that Malaysian sovereign fund Khazanah, along with Baring Asia, was preparing an offer to buy Essar-owned Aegis BPO.