Firstsource to acquire US-based MedAssist

Firstsource to acquire US-based MedAssist

Firstsource Solutions Ltd, the transaction-processing unit of India’s second largest bank, agreed to buy MedAssist Holding Inc. for $330 million (Rs1,360 crore) to gain access to the US market for health-care back-office services.

MedAssist, based in Louisville, Kentucky, has 1,400 employees, more than 1,000 clients, including hospitals and large physician groups, and posted sales of $99 million in 2006, Mumbai-based Firstsource said in an emailed statement.

“The health-care space in the US is a tremendously attractive market for back-office companies," Ananda Mukerji, chief executive officer at Firstsource, told reporters in Mumbai on Wednesday. “Administrative costs for hospitals are in the vicinity of $100 billion alone."

There would be no change in the management of MedAssist and employees would continue in their current jobs, Firstsource said in a filing with the Bombay Stock Exchange (BSE).

Indian software service companies are acquiring rivals overseas in a bid to increase their presence in their largest markets or to be nearer to customers.

Wipro Ltd, the country’s third largest software exporter, purchased Infocrossing Inc. for $600 million on 6 August. Wipro’s larger rival, Infosys Technologies Ltd, bought three back-office service centres from Royal Philips Electronics NV for $28 million 25 July.

Firstsource, a unit of ICICI Bank Ltd, is raising as much as $275 million in debt in the US at Libor, or the London interbank offered rate, plus 250-350 basis points to partly fund the acquisition. A basis point is 0.01 percentage point.

The remainder will be paid through cash reserves of more than $80 million. The cost of funds has risen because of the ongoing turmoil in the credit markets in the US.

“Clearly, spreads have widened," Mukerji said. He didn’t elaborate on the previously negotiated cost of debt. Firstsource rose 10% to Rs79.4 on BSE.