Essar’s Aegis BPO buys PeopleSupport of US

Mumbai, Aug 4 The Essar group said on Monday that its outsourcing outfit Aegis BPO has agreed to buy the Nasdaq listed off-shoring firm PeopleSupport Inc for $250 million (Rs 1,057 crore).

This would be the eleventh acquisition by Aegis in the last four years.

Post the acquisition, the companies will merge through Essar Services (Mauritius) and create an entity that would have revenues of $500 million and employ about 29,000 people.

Currently Aegis employs around 20,000 persons, and PeopleSupport, 8,500.

Under the terms of the agreement, Aegis will pay shareholders of PeopleSupport $12.25 per share, a 29 per cent premium to the closing share price on August 1, 2008, said a joint statement from the companies.

The deal will be funded through internal accruals of the Essar group, said Mr Aparup Sengupta, Global CEO and Managing Director of Aegis BPO, at conference call here on Monday.

New clients

Apart from getting 15 new clients, this 100 per cent buyout will enable the Mumbai-based Aegis to add Philippines to its delivery locations; this will also help it foray into the travel and transportation sector, he said.

Mr Sengupta said that this sector is largely recession-proof for a services provider because even during a downturn in this sector, constituent companies tend to cut down on costs by outsourcing more.

The deal values PeopleSupport at 1.7 times its earnings. The Los Angeles-based company had clocked revenues of $147 million for the year ended March 2008, while for the same period Aegis reported revenues of $320 million.

The US company offers customer management, transcription and captioning and additional BPO services for global clients in areas such as travel, consumer, financial services, healthcare and others. It has three delivery centres in the Philippines and one in Costa Rica.

“Apart from being a low cost destination, the Philippines has the advantage of having a large English speaking population,” said Mr Sengupta.

On completion of this transaction, which could take about 3-4 months, PeopleSoft would cease to be a listed company. This acquisition will add about $17 million to Aegis’ EBITDA in the current financial year. PeopleSupport clocked 12 per cent EBITDA margins in the last financial year ended March 31.

PeopleSupport’s Phillipine facility will be rechristened ‘Aegis PeopleSupport’, said Mr Sengupta. However, the combined entity will continue to be known as Aegis BPO.