Carlyle to secure $1 bn debt for Hexaware bid
MUMBAI: The Carlyle Group has reached an agreement with a group of banks to raise over $1 billion to support its planned acquisition of Mumbai-based Hexaware Technologies, three people aware of the discussions said.
Carlyle has emerged as the preferred bidder for Baring Private Equity Asia owned IT services firm Hexaware for a $3 billion acquisition, Reuters reported last week. If successful, it would be winning a competitive bidding process against peers including KKR & Co. and Bain Capital, as well as French company Teleperformance SE for Hexaware, the agency added.
“Carlyle is raising at least $1 billion debt for this acquisition from a clutch of international banks including Nomura, HSBC, Goldman Sachs, Barclays as well as others such as BNP Paribas, Deutsche Bank and Standard Chartered,’” one of the three people cited above said on condition of anonymity, as he is not authorized to talk to media.
The so-called leveraged buyout (LBO) financing will be among the biggest such debt deals stitched up by a private equity firm to acquire an Indian company. In July, Blackstone, the biggest alternative investment manager globally, had resorted to a similar sized LBO facility to fund the acquisition of IT services firm Mphasis Ltd.
Private equity firms frequently use debt to make buyout acquisitions, as it helps the PE firms make larger acquisitions as well as improve their returns.
According to the second person cited above, the debt facility is likely to be structured as a one-year bridge loan, which will be later taken out by an international bond offering. Such bridge loans are availed of by PE firms from investment banks to acquire a company. After the acquisition, the company issues high-yield corporate bonds backed by its cash flows that will be used to repay the bridge loan.
Carlyle declined to comment on the development.
Baring had acquired a majority stake in Hexaware in 2013 from its founder Atul Nishar and private equity firm General Atlantic.
The PE firm took the company private last year as part of its plans to seek a buyer for the company. While the company had offered a price of ₹264.97 apiece to public shareholders to delist the company, a price of ₹475 per share was discovered in the reverse book-building process, which was accepted by the company.
Hexaware provides digital services such as automation, cloud and customer services-related technology to a wide range of industries including banking, financial services, capital markets, healthcare, insurance, manufacturing, retail, education, travel, transportation and logistics.