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Xchanging soars as Capita and Apollo make offers for outsourcing group

Discussion in 'Market News' started by Lily, Oct 7, 2015.

  1. Lily

    Lily Forum Member

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    Analysts say higher offer could come after insurance specialist reveals talks

    Outsourcing group Xchanging has soared 50% after receiving takeover offers from both Capita and private equity firm Apollo Global Management.

    The company, which runs invoice processing and claims settlement for the insurance sector and was the inaugural sponsor of the university boat race, said it had been in talks with Capita since 11 August, with an initial bid of 140p a share in cash raised to 160p. Capita plans to fund any deal with a placing of new shares.

    We cannot discount the emergence of a yet higher offer from another party, perhaps a peer in global financial services support seeking additional synergies or indeed a higher offer from either Capita or Apollo; thus we believe that Xchanging is now firmly in play.

    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.

    Our first thoughts is that there are significant risks involved in this possible acquisition. It would be the single largest to date for Capita and would take the company outside of the UK (around 68% Xchanging sales) into new geographies such as the US, South East Asia and Continental Europe. Xchanging is a complex company with complex accounting. We view the possible offer for Xchanging as a departure from management’s stated strategy.

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