CVC Capital Partners has no plans to launch a takeover bid for British outsourcer Capita CPI.L and is only looking at specific units the company is hiving off, a source with knowledge of the matter told Reuters.
Capita shares jumped as much as 14% to the top of London’s mid-cap index.FTMC on Thursday after the Daily Mail reported CVC was interested in buying the entire business and could face competition from a rival investment fund.
The European private equity house is shying away from turnaround deals which typically involve taking on the hefty costs of restructuring coronavirus-hit companies and bringing them back on track, the source said.
Capita, which collects TV licence fees across Britain, confirmed in a statement that it had not received a takeover offer from CVC.
CVC had no immediate comment.
Capita has been hit hard by the pandemic and its stock has tumbled as much as 80% this year making it vulnerable to takeover approaches.
The FTSE-250 firm reached out to CVC and other buyout funds during the summer to solicit bids for its Education Software Solutions (ESS) unit which was put up for sale in June, the source said.
CVC is exploring a possible bid for the unit which is valued at about 500 million pounds ($664 million), but no deal is certain, the source said.
Capita boss Jon Lewis said in August that management had to accelerate some strategic decisions, including the ESS divestment, to navigate the crisis.
The London-based firm posted a 28.5 million pound loss for the first half of 2020, saying it would not generate sustainable cash flow for up to two years.
In June, it agreed to sell its legal process software product Eclipse Legal Systems to Access UK.
Analysts at Jefferies said Capita’s shareholders would welcome a bid for the company, adding private equity investors could implement a break up plan and divest non-core assets.
Source: Reuters.com