Topic: Convergys to Acquire Stream for $820 Million

[Rockford]

Convergys to Acquire Stream for $820 Million

Acquisition Will Create $3B Customer Management Services Company with Expanded US and Global Presence and Delivery Capabilities
Convergys Expects Transaction to be Accretive to EPS and to Strengthen Long-term Revenue and Earnings Growth Potential
Convergys Also Reaffirms Guidance for 2013

CINCINNATI--(BUSINESS WIRE)--Convergys Corporation (NYSE: CVG) and Stream Global Services, Inc., both premier providers of customer management services, today announced entry into a definitive merger agreement under which Convergys will acquire Stream for a total enterprise value of $820 million in cash, subject to certain adjustments, from funds managed by Ares Management and Providence Equity Partners, as well as from LiveIt, the BPO investment arm of Ayala Corp. Convergys also announced the transaction is expected to add approximately $0.35 in diluted earnings per share (EPS) in the first 12 months after close, excluding one-time charges, intangible amortization and integration costs.

“This acquisition is an important step forward in our plan for strategic growth and value creation”

By adding Stream’s complementary client base, geographic footprint and service capabilities, Convergys expects the acquisition to expand and strengthen its US and global presence in the $55 billion outsourced customer management services industry. When combined, total company revenue is expected to exceed $3 billion, creating the second largest customer management services provider in the world.

“This acquisition is an important step forward in our plan for strategic growth and value creation,” said Andrea Ayers, president and CEO of Convergys. “Both Convergys and Stream have a history of commitment to our clients, and dedication to excellence in representing the world’s largest brands. We expect this transaction to be highly accretive and to allow us to leverage our strong balance sheet to position Convergys for enhanced revenue, margin improvement and EPS growth.

“We believe this combination will strengthen Convergys by diversifying our client base and enabling us to offer a wider range of customer transactions in a more cost effective manner from multiple geographies, at scale. Our plan is to build upon the best practices and management teams from both companies to deliver superior customer benefits and enhanced value for our clients and shareholders, and provide new opportunities for our employees,” Ayers said.

Strategic and Financial Benefits of the Acquisition

Expands and diversifies client base – Stream serves a number of the world’s leading companies in the technology, computing, telecommunications, retail, entertainment/media and financial services industries, and its marquee client list is complementary to Convergys’ client base. Stream’s technical support services expertise is expected to strengthen Convergys’ position in the technology industry and also to provide new opportunities to offer Convergys’ extensive suite of capabilities to a broader set of clients.

Extends geographic reach, breadth of languages and service capabilities – By integrating Stream’s delivery capacity in the Americas, Europe, Asia-Pacific, Middle East and Africa, Convergys expects to extend its geographic reach, breadth of languages and service capabilities. Stream’s in-country language skills across Europe and Latin America are expected to provide Convergys with augmented solution offerings for multinational clients in the United States and around the globe.

Enhances revenue and profit potential – The transaction is expected to provide Convergys with a more diversified portfolio of clients, geographic footprint, and service capabilities to enhance revenue, cost efficiency and opportunity for future growth, which Convergys expects will strengthen its prospects for long-term revenue and profit improvement. Once the transaction is complete, Convergys expects to have approximately 125,000 employees serving clients in 35 languages from over 135 contact centers in 25 countries.

Transaction and Integration Details

The transaction is expected to close in the first quarter of 2014, subject to the satisfaction of customary closing conditions, including applicable regulatory requirements.

Convergys today also announced its intention to finance the transaction through $400 million of cash on hand, a new $350 million term loan for which Convergys has received a commitment letter from Citigroup Global Markets Inc. and BofA Merrill Lynch, and existing credit facilities for the balance, although obtaining such financing is not a condition to the closing of the transaction. Convergys expects to extend its accounts receivable securitization and revolving credit facilities, and upon closing, to have at least $550 million in available liquidity including undrawn credit facilities, cash and short term investments.

Convergys and Stream plan to establish a transition team composed of members of both management teams to prepare for and oversee the integration of the businesses. Because of the compatible business models and numerous similarities between organization structures and cultures, Convergys expects a smooth integration and annual cost synergies of approximately $25 million when fully realized.

Centerview Partners LLC acted as financial advisor to Convergys, and Robert W. Baird & Co. acted as financial advisor to Stream. Wachtell, Lipton, Rosen & Katz and Frost Brown Todd LLC acted as legal counsel to Convergys and Proskauer Rose LLP acted as legal counsel to Stream.

Read more:
http://www.businesswire.com/news/home/20140106006784/en/Convergys-Acquire-Stream-820-Million#.UsuqxrQUHP0

Please delete / lock if posted