Rupert Soames has delivered on one of the first pledges he made when he became chief executive of Serco, the troubled services group, with the sale of its massive offshore outsourcing operations to the private equity firm Blackstone for £250m.
Mr Soames identified the business, which supplies back-office services such as customer loyalty programmes, marketing and data management to hundreds of multinational firms, as non-core in March this year. Serco bought the business from Blackstone in 2011, for about £400m.
The sale price was seen by analysts at Shore Capital as slightly higher than expected, while Liberum thought it slightly below par. Several private equity firms were reported to have pulled out in the early stages of the auction process.
Mr Soames said: “In March we set out our strategy to focus Serco on being a leading supplier of public services. A core part of that strategy was our decision to sell our private sector BPO [business process outsourcing] operations. This disposal will not only strengthen further our balance sheet but also enable us to focus on the group’s five core markets. Overall this gives us greater financial and operational flexibility.”
The business being sold employs 51,000 people in 67 different call centres, of which 48,000 staff and 53 centres are in India.
It is expected to generate revenues of £235m this year and would have contributed trading profits of some £23m. The sale was worth £9m more than the value of the business on Serco’s books.
Serco said that in its loss-making UK BPO operations it had made some progress in ending unprofitable contracts early, but the rest were still likely to make a loss of £11m this year.
“This is good news,” said Stephen Rawlinson, an analyst at the broker Whitman Howard. “It is doing the right things, in our view, and that will show in due course. Management has never said it will be swift or smooth as the business recovers.”
Serco said the deal was expected to be completed by the end of the year and would comprise £220m in cash and a £30m loan note.
The company’s shares rose 2.4p to 105.8p on the news.Reuse content