Blackstone, Pactera insiders make $680 million offer

Mon May 20, 2013 2:04pm EDT
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By Greg Roumeliotis

(Reuters) - Pactera Technology International Ltd PACT.O said on Monday that Blackstone Group LP (BX.N: Quote), together with the company's management, made a $680.3 million non-binding proposal to take China's largest technology outsourcing firm private.

Pactera said it expected its board of directors to form a special committee of independent directors to consider the consortium's offer of $7.50 per share. Pactera shares surged 31.1 percent to $6.90.

Suspicion over accounting standards has been a major drag on U.S.-listed Chinese companies, giving management at some companies an opportunity to team up with private equity firms and make offers that capitalize on big discounts to peers on the Hong Kong and Chinese stock markets.

Prior to Monday's announced proposal, Pactera shares were down 33.8 percent this year. By comparison, the NASDAQ .IXIC, where it is listed, is up 15.9 percent.

Pactera was trading at 3.3 times its projected 12-month earnings before interest, taxes, depreciation and amortization as of the end of trading on Friday, compared with an average 9.1 times for its peers, according to Thomson Reuters data.

In a letter on Monday, Blackstone said it had teamed up with Pactera's non-executive chairman and VanceInfo co-founder Chris Chen, Pactera Chief Executive Tiak Koon Loh, and three of the company's executive committee members.

Chen and Loh, which had respective stakes in the company of 3.9 percent and 1.7 percent as of April 15, would roll over their equity in the proposed deal, which would be financed with equity from Blackstone and bank debt, according to the letter.

Funding for buyouts of Chinese companies is usually done through offshore holding companies but many banks will not finance such deals due to the risk of non-payment. Limited financing has restricted deal sizes and has increased the amount of equity that private equity firms have to invest.   Continued...