Disagreement over valuation leading to delay.
The bidding for a majority stake in India’s second largest business process outsourcing (BPO) firm, WNS Holdings, does not show immediate signs of coming to a close.
More than eight players have shown interest in acquiring the 50.12 per cent stake of private equity (PE) investor, Warbug Pincus, in WNS. These include that of IT and BPO players like Genpact, ExlServices, HCL Technologies, Wipro, Cognizant and Quatrro (which has teamed with PE players). Moreover, PE players like Kohlberg Kravis Roberts & Co (KKR), Bain Capital, and Carlyle are also understood to be in the fray.
The deal is getting delayed due to disagreements over valuation. The NYSE-listed WNS stock price has been hovering at $15 a share, and Warbug’s 50.12 per cent stake represents 21.3 million shares. At the current price of $15 a share, Warbug’s stake would be valued at $319.5 million (Rs 1,550 crore). WNS closed financial year 2009 with a revenue of $386.4 million (Rs 1,855 crore). Sources say firms, till date, have bid in the range of $400-600 million (Rs 1,940-2,900 crore). But WNS is asking for much more.
“Currently, the stock is around $15. Buying the stake at that level is not possible. If the deal happens, we would look for a huge discount to the current value,” said a senior executive of a firm interested in the WNS stake. “Since the share prices have moved up, it has led to an increase in valuation of the company,” agreed an investment banker close to the development, adding: “From what I understand, September 23 is the last date for bidding. The winner will have to make a mandatory open offer in the US.”
“Pricing is the concern right now,” concurred another PE players, adding: “The investors are not ready to reduce their price expectation. Hence, there are good chances of the bidding date being extended. However, with most of the large PE players sitting on huge capital, buying Warbug Pincus’ stake should not pose a problem.”
Other than Warbug Pincus, the other shareholders in the company are Nalanda India Fund (12.22 per cent), Columbia Wagmer Asset Management, L.P (9.98 per cent), FMR LLC (9.43 per cent) and Tiger Global Management (6.6 per cent).
In an earlier notification, the company had said: “We have received expressions of interest from various interested parties regarding possible change of control transactions. WNS is committed to maximising shareholder value and is evaluating these opportunities, as well as other alternatives. However, as of the date of this announcement, WNS has not entered into any definitive agreement with any party relating to any such transaction, and no assurances can be given that any such agreement will be entered into, or on what terms.”
