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Recap 2013: Top PE deals

31 December, 2013

Year 2013 saw the emergence of large buyout deals in India, with four of the top five deals putting private equity investors firmly in the driver’s seat. IT sector was red hot, accounting for three of the top five deals this year.

Another notable trend in PE deal-making was preference for secondary transactions as capital markets virtually remained shut for primary issues which could have allowed IPO exits. Four of the five deals have significant secondary component as mature investments found new takers.

One marked feature was the absence of infrastructure among the big deals, a sector which previously figured almost every year among the top transactions. Infrastructure has been going through its challenges with delayed projects and lack of successful exits.

Here’s a look at the top five PE deals of the year.

Bharti Airtel raises $1.26 billion from Qatar Foundation Endowment

Bharti Airtel, the world’s fourth-biggest cellular carrier by customers, raised $1.26 billion (Rs 6,796 crore) from Qatar Foundation Endowment by selling 5 per cent stake through a fresh issue of shares. The deal is the largest ever private equity investment in India over the last five years and second only to the previous big deal where Temasek had invested a record $2 billion to buy indirect stake in Bharti Airtel.

The deal underlines the Bharti’s attractiveness to investors, as it has raised funding from marquee investors in the past too. Its deal with Warburg Pincus more than a decade ago is still seen as symbolic of the opportunity of multi-bagger returns in the country. SingTel, which is owned by Singapore government’s investment arm Temasek Holdings, is the second largest shareholder in Bharti Airtel after its promoters. Interestingly, Temasek part-exited its six-year-old investment in Bharti Airtel at a loss by selling around one-third of its holding to SingTel in $302 million deal.

KKR & Co acquires Alliance Tire for $470 million

Private equity major KKR & Co acquired a controlling stake in the Alliance Tire Group (ATG)

from Warburg Pincus in what would be the largest private equity control transaction in the last seven years in India. The leveraged buyout had an equity valuation of $522 million and KKR will also take

$125 million on the balance sheet of Alliance Tire. This will give the company an enterprise valuation of nearly $650 million.  This was the largest deal closed by KKR in India after it opened an office in the country in 2009. Since ATG is registered in Netherlands, KKR was able to leverage its equity investment in the deal.

ATG is a global tyre maker, producing off-highway tyres and employs over 2,500 people. The company primarily caters to agricultural, forestry and construction industries. It recorded revenues of around $500 million for CY2012.

Baring Asia acquires Hexaware for $443 million

In what was one of the largest buyout transactions in the Indian IT space, Baring Private Equity Asia acquired 71 per cent stake in Hexaware Technologies Ltd for $430 million. Baring PE Asia bought 27.7 per cent stake in the company from promoter group led by Atul Nishar and another 14.1 per cent stake from General Atlantic, aggregating to 41.8 per cent for $260 million.  The PE firm agreed to pay Nishar and General Atlantic Rs 126 or Rs 135 per share, the higher price payable if the PE firm’s stake reaches 50 per cent or above in the transaction, which happened.

After this it made an open offer where it picked up 20 per cent and bought around 10 per cent from ChrysCapital in market deals. As Baring PE Asia has become the promoter of Hexaware, it added leverage to the transaction by pledging part of its holding in the company with Standard Chartered Bank, Hong Kong.

Apax Partners acquires GlobalLogic for $420 million

Private equity major Apax Partners closed its second deal in the Indian IT space by acquiring GlobalLogic, an offshore software R&D services provider. The acquisition is being done through ODSA Topco Ltd, a company backed by Apax Partners, for $420 million. The deal, which was also an LBO, provided exit to GlobalLogic’s venture investors like WestBridge Capital, New Atlantic Ventures (NAV), New Enterprise Associates (NEA), Sequoia Capital and Goldman Sachs Asset Management International. GlobalLogic raised around $45 million in three rounds of venture capital funding besides a pre-IPO round by Goldman Sachs Asset Management International in 2010.  The company was looking at a listing in the US but its plans hit a hurdle due to volatile capital markets.

The transaction is also the third investment by Apax Partners, which has been selective in India, and its first buyout deal. It invested in India’s largest healthcare chain Apollo in 2007 and exited with three-fold returns. In early 2011, Apax Partners invested over $350 million in Nasdaq-listed information technology firm iGate to back its acquisition of Patni Computers.

Partners Group acquires CSS Corp for $270 million

Partners Group, the Switzerland-based private market investment manager with $33 billion under management, acquired a majority stake in CSS Corp, a remote infrastructure management and technology support services company. The stake was purchased for $270 million in a leveraged buyout deal which gives SAIF Partners, Goldman Sachs and Sierra Ventures an exit. The deal for CSS Corp was driven by the need of its private equity investors looking at an exit. These players collectively held 70 per cent stake in the IT services firm. The deal also involved Sanjay Chakrabarty, a technology entrepreneur, picking up a minority stake in CSS.

CSS has raised multiple rounds of private equity funding. SAIF Partners had invested $22.5 million in CSS in 2006, picking up the stake from Baring Private Equity India besides a primary investment into the company directly. Then in 2007, CSS raised a $25 million round led by Goldman Sachs. Venture capital firm Sierra Ventures also held a stake in CSS.

(Edited by Joby Puthuparampil Johnson)


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Recap 2013: Top PE deals

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