Akastor sells business unit in $129M deal
- Business & Finance
Oil service investment company Akastor has entered into a definitive agreement to sell Frontica Business Solutions, a service provider within the oil & gas industry, to Cognizant.
Akastor is selling its business for a consideration of NOK 1,025 million (around $128.7M) on a debt- and cash-free basis. Frontica is comprised of the Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO) business segments of the Frontica Group and excludes Frontica’s staffing business, Frontica Advantage.
According to its press release on Monday, in recent years, Frontica has embarked on a transformation agenda to shift the company from a predominantly internally-focused shared service unit to becoming a broader commercial provider of ITO and BPO services within the oil and gas industry. Cognizant, a provider of information technology, consulting, and business process services, aims to accelerate Frontica’s transformation process and expand its business into new segments and geographies going forward.
“Frontica has undergone an impressive organizational development and will now benefit further from Cognizant’s scale, market position and technology infrastructure,” says Kristian Røkke, CEO of Akastor.
Frontica has focused its business within ITO and BPO on SAP consulting, payroll solutions and other IT consultancy services relevant for the oil and gas industry. The company has expanded its business pipeline in 2016 by entering into long-term agreements with clients into 2021, giving a total order backlog of NOK 5.1 billion at the end of the second quarter 2016.
“I am proud of what Frontica has accomplished in recent years and am confident in the company’s position for future growth,” says Niels Didrich Buch, Frontica CEO. “Cognizant has an impressive track record and we are looking forward to becoming a part of their global platform to the benefit of our existing customers, also enabling expansion of our business.”
“We look forward to welcoming Frontica’s talented employees into the Cognizant family once the acquisition is closed. Together, we will create even greater value for our clients in the Nordics and other geographies,” said Santosh Thomas, President, Global Growth Markets, Cognizant.
“The acquisition helps us strengthen our oil and gas industry expertise, expand our presence in key markets, and deepen and broaden our service portfolio for our clients. Frontica will play a key role in helping us realize these benefits through their specialized capabilities in serving the oil and gas industry.”
The sale will generate an accounting gain of approximately NOK 500 million to Akastor to be recognized in the fourth quarter results. The purchase price will be adjusted for actual net debt and working capital as per closing of the transaction. The transaction is expected to release approximately NOK 900 million in cash for Akastor.
Frontica staffing business, Frontica Advantage, is not a part of the transaction and will continue as an Akastor portfolio company. Certain other business segments of Frontica Business Solutions, not related to the core ITO and BPO services, are not included in the transaction scope.
The transaction is expected to close in the fourth quarter of 2016.