Blackstone is all set to acquire VFS Global, the world’s largest visa outsourcing and technology services specialist, at an enterprise valuation of a little over $2 billion, said people aware of the matter. With this proposed acquisition, the American investment firm is taking yet another bet on technology and IT services but one that is focussed on travel and mobility of people, when global travel is limping back after a year and half of stoppage.

The deal value will be closer to the $2.5 billion valuation VFS Global and its investors had sought when they launched a sale and a parallel IPO process in 2019. That move was aborted due to the pandemic.

Blackstone will be paying a billion dollars in equity for a 75% stake in the company and the rest will be leverage taken on for the acquisition. The final signing between all parties is expected this week, maybe as early as Thursday, the people said.

ET in its September 15 edition was the first to report that the world’s largest PE fund manager was in advance negotiations for this transaction.

‘A Contra Bet but a Long-Term One’

Founded in India, VFS Global is a spinoff of Swiss travel group Kuoni. It is 90% owned by Swedish private equity firm EQT and 10% by the Kuoni Foundation and founder-CEO Zubin Karkaria.

The Swedish private equity firm had bought Kuoni in 2016 with a view to breaking the company up. After selling off former Kuoni businesses GTA to Cinven-owned Hotelbeds, and Global Travel Services to JTB Corp, EQT strengthened VFS with a series of bolt-on acquisitions. In 2018, the Kuoni Group merged into VFS Global, making its India-born business the mainstay of the group. After this transaction, EQT, Kuoni Foundation and Dubai-based Karkaria will own the remaining 25% with the first two holding around 10% each.

Blackstone, VFS, EQT declined to comment.

The deal, once announced, will be Blackstone’s second investment in IT services this year in India, after doubling down on Mphasis and reinvesting in it.

The fund globally has been cherry-picking undervalued travel-related businesses that got disrupted by the pandemic, making a longer-term bet on the space. In January, it acquired Bourne Leisure, which runs Butlin’s and Haven’s holiday parks in the UK. It followed up with a $6.2 billion offer for Australian casino operator Crown Resorts.

In a recent interview to Bloomberg, John Gray, president of the $684 billion investment firm, said Blackstone had been selling assets to take advantage of liquid markets, but also simultaneously buying businesses with a long runway for growth. “What you don’t want to own is long-duration fixed income, because there you’re more vulnerable,” he said and added: “It’s not like we think that it’s the only thing to be doing, because we’re buying a lot of things too. There was a period of six to nine months when there wasn’t much selling. Now there are opportunities in infrastructure, renewables, private equity and real estate.”

‘LONG-TERM BET’

“This is a contra bet but a long-term one. People will travel and we are already seeing traffic – both business and leisure pick up. As a firm, this plays onto their digital and consumer themes,” said an executive in the know of this deal, speaking on the condition of anonymity as the talks are still in private domain. “Once the earlier process got aborted, then Blackstone moved in for a bilateral track with the CEO and the investors.”

VFS began with visa application services for the US embassy in India in 2001. Since then, it has grown into a global operation with more than 3,532 application centres in 143 countries across five continents, serving 62 client governments. The company has processed more than 231 million applications and over 101.08 million biometric enrolments since 2007. Mumbai-born Karkaria, its founder, is a former Kuoni India head.

Zurich and Dubai-headquartered VFS competes with French company TLScontact.

With a focus on contactless experience, VFS enables customers to apply or have document pre-checks remotely and provides digital payment options. It widened the ‘Visa At Your Doorstep’ service that allows enrolment of biometrics from home, and introduced two-way passport pick-up and drop so the customer does not need to visit its centres. Additionally, pre-departure PCR Covid test booking service was launched in around 40 countries.

VFS is also providing Dubai Expo 2020 ticketing service in key markets like the GCC, India, China, Russia, the UK and Germany.

The company has diversified into home delivery of birth and death certificates and driving licences in Mumbai. It works on establishing the identities of illegal immigrants in South Africa, while deepening expertise in blockchain technologies and facial recognition systems.

This helped derisk the business, when many Asian countries have tightened measures in recent months to contain the spread of the delta variant of the coronavirus.