Business process outsourcing firm Cambridge Solutions Ltd has sold its loss-making wholly owned arm Cambridge Integrated Services Group, Inc. (CISGI), which houses the US workers’ compensation and third party administration operations, to US-based Sedgwick Claims Management Services for $22.7 million (around Rs 101.9 crore).
British outsourcing firm Xchanging Plc. owns around 75 per cent stake in Cambridge Solutions.
Due to unsatisfactory returns and significant future commitments of the CISGI business, Cambridge Solutions’ board of directors approved the sale of CISGI operations (US workers’ compensation and third party administration) to Sedgwick.
“Selling the CISGI operations to market leader Sedgwick will provide our customers and employees with a good home for the future,” said Ken Lever, executive director, vice-chairman and acting CEO of Cambridge Solutions.
The deal involves payment of $22.7 million in cash, of which $3 million will be held in escrow for up to 18 months, the company said.
A property & casualty claims and risk management services provider, CISGI serves self-insured employers, insurance carriers and public entities in the USA, Europe and Australia. The sale will cover workers’ compensation, managed care, consumer claims, professional liability claims and structured settlements operations of CISGI, as well as most of its contracts.
The transaction will also include the purchase of Cambridge’s technology infrastructure which will enable continued service delivery to Cambridge clients. Besides, CISGI and Sedgwick will enter into a transition services agreement to facilitate a smooth handover of operations. The transaction will be reflected as a discontinued operation in the Q2 2011.
Sedgwick is the North American provider of innovative claims and productivity management solutions. The company and its affiliates deliver cost-effective claims administration, medical management, risk consulting and related services. The current acquisition will enable the company to add an array of services in the areas of transportation liability, consumer financial services, structured settlements and medicare compliance.
Cambridge Solutions, with approximately 4,600 employees on board, is an international BPO and IT services provider, and is listed on various the Indian stock exchanges. The company has reported a total income of $49.53 million in FY10, with a net loss $.32 million. Almost two-thirds of Cambridge’s revenue comes from high-end BPO operations spread across the USA, India and Europe. Additionally, it has a strong presence in the lucrative insurance processing domain.
A similar deal took place only a few weeks ago when ICICI Group-backed IT & ITES firm 3i Infotech sold its US-based Global Billing & Payments unit, comprising of Regulus Group and J&B Software, to an affiliate of private equity firm Cerberus Capital Management, L.P. for $137 million.