Global-O&O

TCS close to buying Citi BPO ?

August 18th, 2008 admin Posted in Uncategorized |

DATE: August 15th, 2008
The Citibank BPO buy out buzz never seems to really fade away. NDTV (www.ndtv.com) reported that TCS is going to get the Citi BPO at a price tag of $475-500 million dollars . If this is true the valuation is almost half of what the Citi BPO was supposedly in the market for over a year or so back.

We seem to have heard it all - starting from a valuation of close to $940 million with Citibank willing to sell 80% . Last year it was Genpact close to buying the BPO. The key point of contention in the last year buy out with Genpact seem to be the commitment Citi was willing to make for long term contracts. With Genpact looking for long term contractual commitments ( similar to the GE deal) Citibank was supposedly not willing to commit to more than three years of assured revenues. Then Citi got a new chief and the priorities shifted and the deal buzz died down though it never went away.

With Citi continuing to shed it’s non core assets and raise capital the BPO arm was on the block again and this time it may be for real.

There were speculations back in June that IBM was the prime contender for the buy out and now it seems to be TCS.

Sooner or later it is going to happen. Citi has strategically decided to shed it’s non core businesses, reduce expenses and expertise is available today with third party vendors to do what the captives intended to do and offer similar or better alternatives. For a vendor like TCS this is a win situation too because they get assured revenue within financial services for a period of time which in today’s financial services turmoil are not easy to come by.

Citi BPO has over 12,000 people spread across fifteen centers in India.

Citi is also a key client for TCS for IT and BPO work. TCS has been growing their own BPO arm and supposedly has around 9000+ folks in their BPO arm. TCS was a late starter in the BPO service offerings compared to some of the their peers. They seem to have done a good job in catching up and diversifying in other non IT areas for process offerings like Pharma.

Here are some archive links on the Citi BPO buzz and the number of times the deal has been done!

TCS bags $500 million Citi deal (Apr, 2006)

Citi seeks $750 mn for 80% of BPO arm (June, 2007)

IBM, TCS and Cap Gemini battle for Citi BPO business - Strong assets favour Big Blue (June, 2007)

NDTV Report – Genpact to buy Citi BPO (Sep, 2007)

Genpact buys Citibank BPO for $700 million (Oct, 2007)

Genpact reportedly buying Citibank BPO (Oct, 2007)

IBM to Buy Citibank BPO (June, 2008)

Citibank to beef up BPO subsidiary in Philippines (July, 2008)

TCS to acquire CITI BPO ? (August, 2008)

I came across this interesting link – nothing official but wonder why someone will put this out there

http://tcsciti.com/default.aspx