October 5, 2015 / 7:52 AM / 5 years ago

UPDATE 3-Outsourcer Xchanging receives competing takeover offers

* Xchanging gets bids from larger rival Capita, PE firm Apollo

* Apollo offers 170p/shr, Capita 160p/shr

* Xchanging rises more than 55 pct, top gainer on LSE (Adds no comment from Apollo, details; updates share movement)

By Esha Vaish

Oct 5 (Reuters) - Insurance-focused outsourcing company Xchanging Plc said it had received competing takeover offers from larger rival Capita Plc and U.S.-based private equity investor Apollo Global Management LLC.

Apollo’s 170 pence per share all-cash offer values the British company at about 421 million pounds ($645 million), based on its shares outstanding as at Sept. 24, and is higher than Capita’s fourth proposal of 160 pence per share.

Shares in Xchanging - which offers services ranging from back-office invoice processing to insurance claims settlement - surged about 55 percent to 171.25 pence, indicating that some investors expected a higher bid.

The news of takeover interest comes months after Xchanging said its procurement unit performed poorly in the first half and that its chief executive would leave.

Capita, which runs services including the UK Ministry of Defence’s pension scheme, said separately that Xchanging was willing to recommend its final offer.

Shore Capital analyst Robin Speakman said bidders were seeing value in Xchanging’s strong insurance business and its Xuber software, which caters to the Lloyd’s of London insurance market.

A third player, perhaps a peer in global financial services support, could join the fray, Speakman added.

Despite Xchanging stock’s steep rise to 171.25 pence, it was trading at an over 3 percent discount to StarMine’s estimates of its intrinsic value - the level a stock should trade at based on its most likely growth trajectory over the next five years.

Up to Friday’s close, Xchanging’s stock had slumped nearly 29 percent this year.

At 0215 GMT, the stock was up 49.4 percent at 165.5 pence. Capita was up 2.3 percent at 1240 pence.

Xchanging said in a statement dated Oct. 4 that it had granted both firms due diligence access.

Capita’s final offer, made on Sept. 24, is 20 pence higher than its first one and represents a 45 percent premium to Xchanging’s Friday close. The FTSE-100 company made its first proposal on Aug. 11.

Capita, which has a market value of over 8 billion pounds and has struck 12 small deals this year, said any deal with Xchanging would add to earnings immediately.

However, the company’s plans to fund a big portion of the deal through a placing of new shares may upset investors, who have in the past expressed concerns about its M&A spree diluting returns.

An Apollo spokesman declined to comment.

Apollo and Capita have until Nov. 2 to make a firm offer for Xchanging as per UK takeover rules. ($1 = 0.6573 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Anand Basu and Anil D’Silva)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below