San Ramon, California-based Caritor has agreed to pay $14.30 for each Keane share, a 19% premium on its share price as at the close of trading on the New York Stock Exchange on Tuesday. Caritor will finance the transaction through a combination of equity contributed by Citigroup Venture Capital International and debt financing from Citigroup Global Markets, UBS Securities, and Bank of America Securities.
The all-cash transaction is not a full reverse takeover, and the resulting company will be private. It will retain Keane’s name and will have 14,000 employees and annual revenues of over $1bn. Caritor’s chairman and CEO Mani Subramanian will head the merged company.
Jason Kupferberg, investment analysts at UBS, described the deal as surprising, and said the premium paid by Caritor was far lower than the 28% premium Capgemini paid for Kanbay last October, reflecting Keane’s poor competitive positioning. Going private would also enable it to avoid public scrutiny as it continues to restructure.
Judging by events in 2006, it is understandable that Keane should wish to hide from the limelight. In May, Keane’s president and CEO Brian Keane, son of company founder John, stepped down over allegations that he had sexually harassed Georgina Fisk, Keane’s vice president of marketing. The following month, the company reached a $1.1m settlement with Fisk who agreed to resign from the company. It also announced that it had reached a similar agreement for an undisclosed amount with another former employee, whose name was not revealed, over similar allegations against Brian Keane.
If Keane had hoped that the settlements would end the adverse publicity, they were wrong. In October, as it announced it was cutting its revenue guidance for the third quarter of the year, the company revealed that Richard Garnick, president of the North American and global business lines and a member of the three-person office of the president, created after the resignation of Brian Keane, had been fired for violating Keane’s policy on travel expenses and unauthorized communications. Garnick was one of the most public members of Keane’s board and had been touted by some as a future CEO at the company.
Keane is in the middle of a significant restructuring program which began in 2005. Named the One Keane Transformation, the project saw the company scrapping its regional operations structure and putting in its place a system involving delivery units based around business lines and vertical industries with global shared services for sales and HR.
Caritor has almost 3,700 employees in locations across the US, UK, France, the Middle-East, India, and Singapore, and generated revenue of approximately $112m in 2005. It works mainly in applications services and systems integration in vertical industries which include financial services, communications, retail, manufacturing, technology, travel and transportation, and the public sector.
