Blackstone consortium in China buyout bid

If accepted, the $662m offer for Pactera Technology will become the most recent privatisation of a China-based company from the NASDAQ.

The Blackstone Group is leading a consortium of investors, including the company management, in a $662.3 million proposal to privatise Chinese technology services firm Pactera Technology International, according to a statement from Pactera.

The management includes non-executive chairman Chris Chen, chief executive officer Tiak Koon Loh and three members of its executive committee. 

The consortium made a preliminary buyout offer of $7.50 per share for all outstanding shares of the NASDAQ-listed business, representing a 43 percent premium to its share price just before the deal was made public. The deal will be funded by a combination of equity and third-party debt and remains subject to approval by a board of independent directors and shareholders. 

Citigroup is acting as the financial advisor to the consortium, with Ropes & Gray and Cleary Gottlieb Steen & Hamilton acting as legal counsels. 

The deal signals that private equity firms are continuing to search for China-related bargains in the US market. 

Also in May, CITIC Private Equity acquired China-based AsiaInfo-Linkage in an $890 million take-private from the NASDAQ, the price representing a 53 percent premium over its 30-day share price average, Private Equity International reported earlier. Similarly, a consortium of private equity investors privatised Chinese digital advertising business Focus Media in partnership with its owner in December, in a $3.7 billion deal – one of the largest buyouts ever of a Chinese company. 

Pactera could become the latest US-listed 
Chinese company targeted by private equity

Numerous accounting scandals sparked by fraudulent activities in US-listed Chinese companies have depreciated the valuations of many Chinese businesses, even those unattached to the scandals. Private equity firms have led the charge in acquiring businesses impacted by the trend, which has offered GPs rare China buyout opportunities at discounted prices.

While this investment strategy is unsustainable as there are a limited number of US-listed Chinese businesses, it will present good buyout opportunities for private equity funds over the coming years and we will “definitely see more”, according to one Hong Kong-based investment banker. 

Other such deals include the Bain Capital take-private of China Fire & Security Group for $255.5 million in May 2011, which the private equity firm bought at a 44 percent premium over its closing price on 4 March that year; and a $688 million take-private of hotel chain 7 Days Inn by The Carlyle Group in March 2013. 7 Days was listed on the New York Stock Exchange and sold at a 30.6 percent premium over its share price on 25 September 2012.