Serco Closes In On Indian Unit Sale To CVC

Serco, the struggling outsourcing group which became embroiled in crisis over its handling of UK public sector contracts, is closing in on its biggest disposal since its new chief executive arrived last year.

Sky News understands that advisers to Serco have entered exclusive discussions to sell Intelenet, an Indian business process outsourcing operation to SPI Global, a Philippines-based peer which is owned by the buyout firm CVC Capital Partners.

A deal has not yet been finalised and sources said completion was still the subject of some doubt.

Blackstone (NYSE: BX - news) , Intelenet's former owner, also tabled an offer to buy the company and is understood to remain keen on a deal.

Intelenet, which provides back office services to companies in the financial services, healthcare, telecoms and travel sectors, is expected by analysts to be worth around $400m (£257m).

The progress towards a sale is likely to relieve Serco investors, who have had to endure a torrid time as the company's shares have been battered by a string of profit warnings, fraud inquiries and, more recently, a rescue rights issue.

Last month, the company said it had raised £555m from the share sale, which Rupert Soames, its chief executive, said had "delivered a much stronger balance sheet and therefore an appropriate foundation on which to implement our new strategy".

"Our focus now is to walk the path to recovery and repay the confidence and support shown to us by our shareholders and lenders."

In addition to Intelenet, which is being auctioned by bankers at Citi, Serco had also flagged its intention to sell divisions handling environmental waste and leisure services.

The environmental and leisure businesses accounted for only around 3% of group revenues and are collectively worth far less than Intelenet.

Mr Soames, the grandson of Sir Winston Churchill, believes the company's future lies as a focused supplier of services to governments in areas such as justice and immigration, defence, transport, citizen services and healthcare.

Last year's profit alerts were the latest in a string of problems for Serco, which had been hit by a ban on winning new Government contracts after it emerged that some work monitoring prisoners had been billed for fraudulently.

Serco eventually agreed to repay tens of millions of pounds to the Government after intense pressure from ministers.

CVC (Taiwan OTC: 4744.TWO - news) and Serco declined to comment on the Intelenet sale talks.