Blackstone to bag $675m in Chinese IT exit

The private equity giant is reportedly selling all of its shares in IT & outsourcing company Pactera, after a two-year hold period.

Blackstone has reportedly sold its stake in Beijing-headquartered technology outsourcing company Pactera Technology International to HNA EcoTech Group, a subsidiary of Chinese shipping and airline conglomerate HNA Group, for $675 million.

The deal is said to value the company at around $930 million including debt, according to sources cited by The Wall Street Journal.

In March 2014, Blackstone led a consortium that acquired Pactera for $625 million, according to law firm Orrick, which advised Pactera on its sale at the time. Members of the consortium include Pactera’s senior management team and Silicon Valley-based venture firm GGV Capital.

Blackstone’s investment came from Blackstone Capital Partners VI, the firm’s 2011-vintage buyout fund which raised $16.3 billion against a $15.2 billion target.

Although a share purchase agreement was inked between Blackstone, Pactera’s shareholders and the HNA EcoTech on 8 August, the transaction remains subject to regulatory approvals and is expected to close before mid-2017, according to Moody's.

Following a proposal by the HNA Group to acquire the company from Blackstone and its other shareholders, Moody’s downgraded the company’s corporate family rating from B1 to B2, noting that “the company has continued to face a high cost base and increasing working capital needs in China. Persistently weak operating margins and working capital outflows have negatively affected Pactera’s cash flow generation and raised its short-term debt.” The corporate ratings agency also said that since the first quarter of 2015, the company has reported operating profit margins below 3 percent, against previous levels of 5 percent to 10 percent.

HNA EcoTech, an affiliate of HNA Group, was set up on 29 March this year. The company offers IT, cloud-based services, online payments, and venture capital consultation in China, Hong Kong and the US.

Blackstone declined to comment on the transaction.