INDIA BUSINESS WORLD - MARCH 2006
THE MONTH THAT WAS

RR DONNELLEY BUYS OFFICETIGER FOR $250 M IN LARGEST BPO DEAL

US-BASED printing company RR Donnelley & Sons announced on Monday that it has signed a definitive agreement to acquire Chennai-based BPO company OfficeTiger in an all-cash deal for around $250 million.

Francisco Partners, along with the founders of OfficeTiger, hold the bulk of the shares in the Chennai based company. The deal is the largest acquisition in the Indian BPO industry, bigger than IBM's acquisition of Daksh. OfficeTiger officials did not explain the rationale for such a high valuation for a BPO company which is not making profit.

OfficeTiger has revenues of less than $80 million, according to industry sources.

Francisco Partners had picked up a stake in OfficeTiger in June 2004, investing close to $25 million in buying out the existing venture funds in the company and investing another $25 million in fresh capital of the company.

This is RR Donnelley's second acquisition of a BPO company in less than a year. Analysts said Donnelley may be keen to cut its costs as a printer and publishing company and wants to obtain critical size quickly in India. OfficeTiger founder and an ex-investment banker Joseph Sigelman told ET: “Donnelley's other acquisition Astron — a UK-based BPO supplier with resources in Europe, India and Sri Lanka — will be integrated with OfficeTiger, and our total employee strength will go up from 4,000 to 6,000.”

Donnelley wants to expand OfficeTiger's low cost BPO services to all its customers, “We have been a customer of OfficeTiger's for several years, we are pleased to announce this acquisition as the logical next step in building our global BPO business,” RR Donnelley CEO Mark A Angelson said.

 “Although this acquisition will mildly dilute earnings in 2006, we expect that together we will realise cost efficiencies and significant cross-selling opportunities and that our non-Gaap EPS will still be in the range of our previous guidance,” he added

OfficeTiger provides basic content based services, which involves creation of presentations, reports and word processing services. The company's clients include investment banking firms, legal firms and publishing company looking for lowering their costs. .