Citigroup Signs $2.5 Billion Agreement with Tata Consultancy Services
MUMBAI, India & NEW YORK, 8 October 2008 -- Citigroup has signed an agreement for Tata Consultancy Services (TCS) to provide services to Citi and its affiliates over 9.5 years for a total of $2.5 billion.
As part of the deal, Citi will sell all of its interest in Citigroup Global Services Limited (CGSL), its India-based captive business processing outsourcing (BPO) arm, to TCS for around $505 million in cash, subject to closing adjustments. TCS has no current plan to merge the Citigroup unit with its operations, and expects to retain the CGSL management team.
The agreement builds upon the existing consulting and outsourcing relationship between the companies where TCS provides application development, infrastructure support, help desk, and other process outsourcing services to Citi.
S. Ramadorai, TCS CEO and Managing Director, said, "This is a landmark acquisition for TCS, helping us not only acquire new capabilities in the banking domain but also underscoring the importance of our long-term, sustainable relationships with our large customers, including Citi. This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth going forward."
The acquisition broadens TCS's portfolio of end-to-end consulting, IT, and BPO services in the global banking and financial services (BFS) sector. TCS says the enhanced scale and expertise will help it provide service improvements to Citi and Citi's clients. The deal comes at a time of global financial market turmoil and pressure for Citi to quickly raise cash.
Don Callahan, Chief Administrative Officer, Citi said, "This is a great transaction that benefits all parties - Citi, our customers, our employees and TCS. Our customers require access to increasingly complex processing solutions and this relationship will achieve a 'best in class' technology model that capitalizes on both CGSL's expertise in financial services and TCS's expertise in process optimization. TCS will offer CGSL stronger growth potential and superior continued services to Citi clients around the world. This transaction is expected to help reduce operating expenses related to business processing and will allow us to focus on our core financial services competencies."
CGSL is one of the largest providers of BPO services within the BFS sector, providing end-to-end process management services across the BFS spectrum and a broad array of services to Citi's consumer, corporate, and global wealth management businesses. CGSL, formerly known as E-serve International, has more than 12,000 employees located in India and anticipates 2008 revenues of approximately $278 million.
N. Chandrasekaran, COO and Executive Director, TCS added, "The acquisition of CGSL has two immediate strategic benefits for TCS. It gives us the ability to offer a comprehensive end-to-end, domain-led solution for business operations of large financial services institutions. It also positions us well to create banking processing platforms by integrating our products and process capabilities. We welcome CGSL professionals into the TCS family, where they will be able to participate in the company's new growth endeavors."
TCS has provided IT services to Citi since 1992 and is currently one of its largest services partners, delivering consulting, IT, and BPO services to Citi across its operations in North America, Europe, India, Japan, Singapore and the rest of Asia Pacific.
The parties expect the transaction to close in the fourth quarter of 2008. Merrill Lynch acted as transaction advisers to TCS, and Citi's Institutional Clients Group advised Citi.
TCS provides consulting and IT services, business solutions, and business process and IT outsourcing services to global businesses. A part of the Tata Group, India's largest industrial conglomerate, TCS has over 116,000 IT consultants serving clients in 50 countries. The firm generated consolidated revenues of $5.7 billion during fiscal 2008, ended 31 March.
*** 31 December 2008 Update ***
Tata Consultancy Services completed the acquisition of Citigroup's interest in Citigroup Global Services Limited (CGSL) for $512 million in cash. Citi also executed the agreement for TCS to provide process outsourcing services to Citi and its affiliates for $ 2.5 billion over a period of 9.5 years. TCS says the acquisition broadens its portfolio of end-to-end IT and BPO services in the global Banking and Financial Services (BFS) sector.
N.Chandrasekaran, TCS COO and Executive Director, said on the acquisition, "This acquisition gives us the ability to offer a end-to-end, domain-led third-party solution for business operations to our large financial services clients. We will also work to create platforms for the future and integrate our strong domain expertise in operations along with our suite of products for the financial services sector."