A new force is set to emerge in the business process outsourcing industry, with private equity firm Capital Square Partners purchasing a 55 percent stake in Greenwood Village, Colo.-based solution provider StarTek.
The deal involves StarTek, No. 80 on the 2017 CRN Solution Provider 500, trading 20.6 million shares of common stock to Capital Square Partners in exchange for 100 percent of Mumbai, India-based outsourcing specialist Aegis – itself a Capital Square Partners portfolio company. Capital Square Partners also will buy 833,333 shares of StarTek common stock at a $12-per-share premium, making it a $10 million investment.
The combination of StarTek and Aegis will create a $700 million company with more than 50,000 employees globally, according to StarTek President and CEO Chad Carlson. Aegis currently operates out of eight countries, with more than 20 sites based in India, and reported revenue of $400 million during the most recent fiscal year.
"There's zero overlap from a geographic perspective," Carlson said Thursday on a conference call with investors. "[The deal is] extremely complementary. I really couldn't have drawn up a better partner from that perspective."
The chief executive added that there is "zero" client overlap between the two businesses, highlighting Aegis' strong presence in the travel and financial services industries alongside StarTek's growing health-care practice. The top three customers of the combined company would account for less than 30 percent of overall revenue, he said.
Leadership from both organizations will be working to determine a management structure for the new company in the coming days, said Carlson, who did not disclose whether he or other StarTek executives will remain with the solution provider.
StarTek, which saw revenue slip nearly 5 percent year over year to $292.6 million in fiscal 2017, expects the transaction to generate $30 million annual benefit to EBITDA by 2020. Carlson said the announcement was "timely" given the headwinds his company is experiencing in the wireless industry and in light of weak response to the iPhone X launch.
The deal is expected to close by the third quarter of 2018. Both companies anticipate unanimous approval from their boards of directors, and StarTek said that "key stakeholders" who own roughly 30 percent of the business have agreed to vote in favor of the transaction.
"We will also work diligently to ramp new business wins as we integrate with the Aegis platform. We are excited to embrace the new larger team once the transaction closes and work together to become a formidable global provider for clients," Carlson said in a statement.