Financial Daily from THE HINDU group of publications
Tuesday, Apr 13, 2004
Mergers & Acquisitions
Corporate - Open Offers
Info-Tech - Mergers & Acquisitions
Citigroup to acquire full ownership of e-Serve Offers public Rs 800 per share
Mumbai , April 12
THE US financial conglomerate Citigroup said it would buy out the public in its India-based back-office affiliate, e-Serve International Ltd, paying Rs 800 per share. Citigroup wants to raise its ownership of e-Serve from 44.4 per cent to 100 per cent and de-list the shares from the exchanges.
Citigroup's announcement comes less than a week after IBM Corp said it would buy Daksh e-services, the country's third-largest back-office firm, for an estimated $150-200 million.
The offer price for e-Serve shares is 27 per cent higher than their closing price on April 8. The stock rose to Rs 800 on the BSE today but closed at Rs 777.75; nearly 24 per cent up from its previous close of Rs 630 a share.
The acquisition of the outstanding e-Serve shares would be made by Citibank Overseas Investment Corporation, a wholly-owned subsidiary of Citigroup, through a shareholder-led reverse book-building process as per the new SEBI de-listing guidelines, a company release said here.
Citigroup, however, said that it might not go ahead with the offer if the final price as determined by SEBI's delisting guidelines works out to more than Rs 800. At that price, the group estimates the purchase would cost about Rs 550 crore. A Citigroup spokesperson said the deal would help the company increase operational flexibility because it is e-Serve's largest shareholder as well as sole customer.
"We believe it is a fair price having determined this in consultation with financial advisors and merchant banker," the Citigroup spokesperson said.
Mr Apurva Shah, technology analyst at equity broking firm Prabhudas Lilladher, says Citigroup might have to revise the floor price upwards as the shareholders have been holding the rather illiquid shares for a long time. Mr Shah said considering the profitability of the BPO firm, Rs 800 appears a conservative price.
The company is expected to show nearly 25 per cent rise in sales for the fiscal year 2003-04. e-Serve had posted a net profit of over Rs 11 crore for the quarter ended December 31, 2003, on an income of Rs 66 crore as compared to Rs 7 crore for the quarter ended December 31, 2002, on sales of Rs 85 crore. Mutual funds such as Birla SunLife, Templeton, Prudential ICICI, Alliance and UTI hold roughly 15 per cent equity of e-Serve.
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