Aegis Communication Inc., the business process outsourcing arm of Essar Group, has acquired US-based., an offshore business process outsourcing (BPO) company for $250 million (Rs 1,061 crore). Aegis will pay $12.25 per share for the Nasdaq-traded PeopleSupport, which is a 29 per cent premium to its closing price Friday of $9.53 and a 42 per cent premium over the average trading price during the previous 30 trading days. The deal is at much lower than the previous offers it received from various parties. It had even received $17 a share and $15 a share offers from potential suitors in January.
PeopleSupport specialises in travel and transport support and banking and financial services. Aegis will now takeover the operations of PeopleSupport, who has around 8,500 employees working in Philippines, United States and Costa Rica. This transaction is subject to customary conditions and regulatory approvals and is expected to be closed by the end of this year. Upon closing of the deal, PeoplSupport will stop trading in Nasdaq.
PeopleSupport Inc had earlier this year rejected multiple bids of $15 per share and later $17 per share from Philippine outsourcing firm IPVG Corp and Asian private equity firm American Orient Capital Partners Ltd. The size of the acquisition at $17 per share would have been $385 million. The reason cited for rejecting the bids was unwillingness or inability of the buyers to provide any evidence to assess their ability to fund the transaction. IPVG later withdrew from the transaction.
Meanwhile, New York-based Levi & Korsinsky, a law firm specialising in financial fraud, has announced an investigation on the proposed acquisition of PeopleSupport. The law firm has asked the shareholders of the firm to contact them. It has not mentioned the details of investigation.
The deal is to be funded through internal accruals of the Essar group. PeopleSupport had revenues of $140.6 million in the fiscal year 2007 and reported a net loss of $1.3 million in the second quarter (June ‘08). Aegis would be getting 15 new clients from this acquisition and would also foray in to travel and transportation sector. Aegis had revenues of $320 million for the fiscal year ending march 2008. The combined entity of Aegis and PeopleSupport will employ around 29,000 people (Aegis employs 20,000) and will have revenues close to $500 million.
“This combination extends Aegis’ capabilities across multiple geographies and domains, which is one of the key strategies of becoming a global outsourcing leader,” said Aparup Sengupta, Global CEO and Managing Director of Aegis BPO. “Combining PeopleSupport and Aegis BPO, with its excellent reputation for customer service and high quality services, creates a wealth of exciting growth opportunities, as well as operational and client acquisition synergies,” said Lance Rosenzweig, PeopleSupport CEO and Chairman, on the acquisition. “We believe that this combination will deliver superior value to PeopleSupport’s stockholders,” he added.
UBS and Edelweiss Capital were the financial advisor to Aegis and Shearman Sterling is providing legal support to Aegis. Credit Suisse was the financial advisor to PeopleSupport and Pillsbury Winthrop Shaw Pittman LLP was the legal advisor.