Media
Acquisition of Australian and Indian businesses from Cambridge Solutions Ltd and payment of Guarantee
13 Jun 2011
Xchanging plc (“Xchanging”) (XCH:L), the global business processing company, announces that it is acquiring from Cambridge Solutions Ltd (“Cambridge”) (CAMB:NS) its Australian workers’ compensation business, Cambridge Integrated Services Victoria PTY Ltd (“CISV”), and its Indian business process outsourcing business (“CSLBPO”), (together “the Assets”).The Assets are currently 100% owned by Cambridge, which is in turn 76% owned by Xchanging. This transaction enables Xchanging to gain full ownership of the Assets and also to consolidate all of its insurance business interests worldwide. In practical terms the transaction will not affect the operations or employees of the Assets.
Xchanging is acquiring the shares in CISV for an agreed valuation of US$16.7 million. It is also acquiring CSLBPO through a business asset purchase for an agreed valuation of US$67.1 million. The total net consideration for the Assets, after adjusting for debt, is US$71.7 million. The total consideration payable by Xchanging will be satisfied in cash. This transaction will have no impact on the net cash position of the Xchanging group.
The completion of the sale of CSLBPO by Cambridge remains subject to Cambridge shareholder approval, which, in accordance with Indian regulations, will be conducted by a postal ballot, the result of which is expected to be announced on 19 July 2011. The value of the Assets is supported by two independent market valuations.
CISV is a workers’ compensation insurance business in Australia whose two principal customers are the State of Victoria and the State of New South Wales. CSLBPO in India conducts a range of outsourced business operations mainly for overseas customers.
In the year ended 31 December 2010, the Australian assets being acquired recorded revenues of AUD42.4 million (£ 25.2million*) and an operating profit before tax and one-off charges of AUD0.5 million (£0.3 million*). This became an operating loss before tax, after one-off charges, of AUD18.8 million (£11.2 million*). The Australian gross assets being transferred had a carrying value at 31 December 2010 of AUD19.7 million (£12.9 million*).
In the year ended 31 December 2010, the Indian assets being acquired recorded revenues of INR1,270.2 million (£17.9 million*) and an operating profit of INR311.2 million (£4.4 million*). The Indian gross assets being transferred had a carrying value at 31 December 2010 of INR330.0 million (£4.7 million*).
Xchanging also reports that, following its announcement on 10 June 2011 to call the guarantee extended to it by Cambridge, it will be receiving $66 million dollars to satisfy this guarantee. Cambridge had extended the guarantee to Xchanging to secure a loan provided by Xchanging to Cambridge Insurance Solutions Group Inc (“CISGI”), Cambridge’s wholly owned subsidiary in the USA.
Ken Lever, Chief Executive Officer of Xchanging plc, commented:
“We are pleased to be making this announcement. These transactions simplify our business structure and our financing arrangements. They deliver repayment of the substantial part of the outstanding loan to CISGI, bring Xchanging 100% ownership of the major assets of Cambridge, reduce the level of minority interest and enable Xchanging to consolidate all its insurance operations worldwide.”
*EXCHANGE RATES USED
For revenue and profit/loss - averages for year 2010
AUD 1.68 = £1
INR 71.03 = £1
For asset values – rate at 31 December 2010
AUD 1.53 = £1
INR 70.47 = £1
Enquiries
Xchanging plc
Ken Lever, Chief Executive Officer
Alexandra Hockenhull, Head of Corporate Communications and Investor Relations
Tel: +44 (0) 207 780 6999
Maitland
Neil Bennett
George Hudson
Tel: +44 (0) 207 379 5151
Ken Lever will host a conference call for analysts and investors at 0800 BST on Monday 13 June 2011. The conference call telephone number is +44 (0) 1452 546 631, conference ID 75304131. For individuals unable to participate in the conference call, a telephone replay will be available until Friday 24 June. Please telephone +44 (0) 1452 550 000, conference ID 75304131.
About Xchanging
Xchanging provides business processing services which are applicable across industries, such as procurement, human resources and technology, as well as industry-specific offerings for insurers and financial services companies.
Cautionary Statement:
This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forwardlooking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Xchanging's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.
There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approval or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.