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KKR in talks for controlling stake in Firstsource

KKR in talks for controlling stake in Firstsource

Mumbai: US private equity (PE) company Kohlberg Kravis Roberts and Co. (KKR) is in talks to buy a controlling stake in Indian back-office services provider Firstsource Solutions Ltd, three people with direct knowledge of the matter said.

KKR is negotiating to buy a stake totalling around 68% of the company from India’s second largest lender ICICI Bank Ltd, Singapore state investor Temasek Holdings Pvt. Ltd andUS-based banking technology group Metavante Technologies Inc., the people said.

A deal has not been finalized, but a sale price could be around $250 million (Rs1,115 crore), said two of the people cited above.

None of the three wanted to be named as they were not authorized to speak to the media.

Firstsource has a market value of $300 million.

PE investment in India fell at least 60% in 2009 when the global financial crisis deepened, but a string of high-profile deals this year suggests a rebound. PE companies invested around $4.1 billion through 269 deals in India during 2009, compared with $10.3 billion from 452 deals in the year earlier, according to Venture Intelligence, a research service focused on PE and mergers and acquisitions.

In the first three months of 2010, PE deals in India totalled around $2 billion, Venture Intelligence said.

The three people characterized KKR as the frontrunner for Firstsource. Another source familiar with the matter said KKR was in talks for Firstsource but did not agree that the buyout firm is the frontrunner but declined to elaborate.

Rival US PE firm Carlyle Group was also eyeing the stake, but was not a strong contender in the process, two of the sources said.

Carlyle declined to comment.

It could not be determined whether there were other bidders pursuing Firstsource.

“ICICI Bank has stated consistently that its investment in Firstsource is a financial investment and the bank would look at reducing its holding over a period of time. The bank evaluates all opportunities on an ongoing basis," ICICI said in a statement emailed to Reuters.

Firstsource and KKR declined to comment.

Temasek declined to comment and Metavante Technologies could not be reached for comment.

On 8 April, Firstsource said its chief executive and managing director, Ananda Mukerji, would be stepping down on 27 July to pursue “other opportunities".

He will be replaced by Matthew Vallance, a member of the company’s board.

Last November, people close to the matter told Reuters that ICICI, Temasek and Metavante had hired Citigroup to arrange the sale.

The three companies tried to sell Firstsource in 2008 in a deal valued at about $400 million, hiring Goldman Sachs, but potential buyers baulked at the price amid the global financial crisis, people aware of the development told Reuters earlier. PE firms typically make minority investments in India, where entrepreneurs are often reluctant to sell out and full buyouts are rare.

Recently, KKR led a consortium investing about $225 million in India’s Coffee Day Resorts, owner of coffee shop chain Cafe Coffee Day, a person familiar with the matter said.

Saeed Azhar contributed to this story.

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