India's Birla Group buys Canadian BPO business

Aditya Birla Group announces acquisition of Minacs Worldwide, a leading business process outsourcing firm for an estimated $125 million.
Aditya Birla Group announced on Saturday that it had entered into an agreement to acquire Minacs Worldwide, a leading business process outsourcing (BPO) firm based in Canada for an estimated $125 million. The announcement was made by Kumar Mangalam Birla, the firm's chairman.

The acquisition will be effected through TransWorks, the Aditya Birla GroupÆs BPO arm. TransWorks currently employs around 4,200 people in facilities across India and Canada. Minacs will catapult BirlaÆs BPO ambitions onto a larger platform as Minacs is a significantly larger firm, about seven times the revenue of TransWorks and employing about 6,000 people. Combined revenues of both firms will be about $300 million.

TransWorks (founded in 1999) is a 100% subsidiary of Aditya Birla Nuvo Limited, the listed company which was formerly known as Indian Rayon and Industries. Aditya Birla Nuvo is a diversified company with interests in viscose filament yarn, carbon black, branded garments, textiles, insurance, information technology services, telecom and BPO. It was in the news earlier this year because it was one of the vehicles through which the Aditya Birla Group bought out the Tata stake in telecom joint venture, IDEA Cellular. Completion of the IDEA transaction was announced on June 20 making this a busy week for Aditya Birla Nuvo.

While announcing the Minacs deal Birla commented: "The acquisition demonstrates our commitment to emerge as a leading global BPO services provider and expand our global footprint. The objective will be to reliably deliver outstanding BPO services to global clients from anywhere in the world."

Minacs has call centres in Canada, the United States and the United Kingdom and strengths in the automobile, telecom and financial services spaces. Birla specifically alluded to the entry into the automobile space which the acquisition will provide. The deal is one of the group's broader forays into Canada. It already operates 2 mills in the country and in India has two Canadian joint venture partners, Sun Life in financial services and Alcan in aluminium.

ReichmannHauer Capital Partners, a Toronto based private equity firm will co-invest with Birla Nuvo and is expected to buy up to 10% of the company. The transaction is subject to various regulatory approvals. Minacs is a listed company with retail shareholders owning about 53% of the shares outstanding.

Even though cross-border M&A (especially in the IT and IT services sector) has become commonplace for Indian companies, stock markets reacted favourably to the news. Aditya Birla Nuvo shares ended more than 5% up on Indian bourses suggesting shareholders welcomed the exponential growth the acquisition will provide to BirlaÆs BPO ambitions. IndiaÆs National Association of Software and Services Companies (Nasscom), the IT software and service industry trade body, released a survey in early June that total exports of the sector has increased from $4.6 billion in fiscal 2004-05 by almost 50% to $6.3 billion in 2005-06. In the same period employment by BPO firms increased from 316,000 to 415,000.

BirlaÆs Canadian acquisition should give him a larger part of this fast growing pie.
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