Jan 15, 2009
KKR trying to lose Aricent
zyakaira notes: Satyam gave up the same day and the deals are now following tech mahindra at satyam. While Wipro has already reported a couple of failures. TCS results today are not going to be a patch on INFY’s run rate but Aricent deal would also lose value if it is to be closed in a hurry. Effectively, it looks more probable that the deal will happen much later after the dust has settled on Satyam, but it remins a good deal for the Indian outsourcing indusstry as it has already developed into a mature sector run by specialists and a KKR would not do growth and corporate governance tenets any good by sticking on to such unlinked portfolios
KKR has its hands full in the global market with funds drying up and no hope for its planned IPO on the NYSE or in Europe. However, this trend is negative from one salient point of view and that is that India and China portfolios as also the ones in Brazil and Russia are about the only profit making ventures with the crumbling sector that is global banking and financial services with developed markets not offering much by way of topline or bottomline in recent years.
Global private equity biggie Kohlberg Kravis Roberts & Co (KKR) maybe looking to exit communications software company Aricent, formerly Flextronics Software Services. KKR is said to be in talks with Wipro, Tata Consultancy Services (TCS) and Tech Mahindra, reports Economic Times. In 2006, KKR had acquired a 85% stake in Aricent for $900 million inone of the largest leveraged buyout in India. Though based in Palo Alto, California, 6,500 of Aricent’s 8,000 employees are based in India.
The interested parties are said to be willing to give Aricent a valuation of $350 million which is the value of the debt from banks alone when the deal was made.
In September last year, Aricent raised $60 million in new round of funding from KKR and Gulf-based Family Office.
Aricent has also had a change of guard with former Wipro veteran Sudip Nandy joining the firm as CEO in October this year. Aricent’s revenues for 2008 are said to be $365 million, with EBIDTA falling to 9% as compared to 12% in 2007. Aricent designs, develops and maintains software for telecom gear makers and operators. Its clients include Bharti Airtel, Nokia and Vodafone.
Bharti Airtel and Vodafone have since also expanded their outsourcing footprint with IBM while Satyam is much more of a prize catch for the bidders. But then Aricent is a stable company going through these turbulent times as more of a bystander, being well entrenched in its own sector. It would be better if it came out and the horse took its wings.
KKR has recently appointed Citigroup veteran Sanjay Nayar to be chief executive of KKR India in order to step up India investments. (see previous post, KKR appoints Sanjay Nayar) KKR also has a strategic investment of $250 million in Bharti Infratel Ltd, the tower arm of India’s largest private sector telco Bharti Televentures.
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KKR is currently exploring Sanjay Nayar’s old friends USL in partnership with Diageo. USL owns brands like RC, UB, Kingfisher and the Bangalore Royal Challengers. ET also reported KKR’s recent interest in More chain owners Aditya Birla Retail
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