Blackstone Aims For Strategic Exit From Pactera

Blackstone Group LP is in the process to sell Chinese information technology outsourcing firm Pactera Technology International Ltd. less than two years after the private equity firm took the NASDAQ-listed company private, according to the Wall Street Journal citing people familiar with the situation.

Potential buyers for Pactera could pay between US$800 million to US$1 billion for the company, compared to the US$625 million price tag when Blackstone acquired it in March 2014.

Buyers including other private equity firms or a strategic buyer may list the company on a domestic Chinese exchange via a reverse merger, says the article.

Many U.S.-listed Chinese companies that were privatized during the past few years originally planned to re-list the company on domestic Chinese exchanges.

The hope was make a quick profit from a large valuation gap between the two countries’ stock markets.

But since then, it has become increasingly difficult to do an initial public offering in China as the country’s stock market suffered volatile swings and regulators tightened on new share offerings.

Many privatized companies are seeking to re-list in China through a backdoor listing, including China Mobile Games & Entertainment Group Ltd. (CMGE), a Guangzhou-based mobile game developer taken private by a group of investors last summer.

Shanghai-based Focus Media Holding Limited completed an A-share market listing via a reverse merger, and Meinian Onehealth Healthcare Holding Co., Ltd., backed by the Carlyle Group and others, completed a backdoor listing last year.

In March 2014, Blackstone led an investor consortium including senior company executives to take the Beijing-based Pactera private for approximately US$625 million.

Pactera’s non-executive chairman Chris Chen, chief executive Tiak Koon Loh, as well as executive committee members, David Chen, Sidney Huang and Jun Su, were part of the consortium.

Pactera reported revenue of US$713 million in 2014, but its adjusted operating margin fell below 3% in the first nine months of 2015 from 8.7% in the same period of 2014, according to a Moody’s credit rating report.