Xchanging, a premier business processing and IT outsourcing firm, has struck a major deal with Capita and Apollo Global Management, resulting in heavy increase in shares for the company. Xchanging’s shares surged 50pc in morning trade to 166p after it emerged that outsourcing company Capita and private equity group- Apollo are both in talks to buy it for about £400m. The company clarified about the acquisition by stating that it has been in talks with Capita since 11 August, with an initial bid of 140p a share in cash raised to 160p. Likewise, Apollo has offered 170p a share, with both sides being granted due diligence.
The announcement has come at a time when the company is facing some serious internal challenges. This became more evident as Xchanging admitted the poor performance of its procurement division and the untimely exit of its chief executive Officer few weeks ago. Analyst Robin Speakman at Shore Capital said, “Capita would likely make a good home, in our view, for Xchanging, though we believe that the company would have to at least match Apollo’s offer of 170p. We view this as a potential strategic deal for Capita, rather than a bolt on at a significant valuation discount to its own. Xchanging’s business is rooted in the UK, but looks to global opportunities.”
Reports have also suggested that for Xchanging, the partnership is a crucial one which will help the company to once again become relevant in the outsourcing market with an extended focus on high-tech services, such as data analytics. However, Xchanging has attempted to reimpose the faith of its investors by making a bold statement saying, “The Board believes Xchanging has a leading insurance software business and an enviable position in the insurance market, a stable capital markets business, and a growing Applications Services business.”