Customer services provider Convergys to buy Stream Global

Mon Jan 6, 2014 6:34pm EST

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(Reuters) - Customer management services provider Convergys Corp (CVG.N) said it would buy rival Stream Global Services Inc from its private equity owners for $820 million in cash in its largest ever deal to expand its client base and international presence.

Shares of Cincinnati, Ohio-based Convergys jumped 20 percent after the bell on Monday.

Stream's STRGB.UL clients include Hewlett-Packard (HPQ.N), Microsoft Corp (MSFT.O), Dell Inc, Salesforce.com Inc (CRM.N), Western Digital Corp (WDC.O) and Nike Inc (NKE.N).

The deal is expected to add 35 cents to profit, excluding items, in the first year after closing, Convergys said.

The company reported per-share earnings of 86 cents for the year ended December 31, 2012.

The combined company is expected to exceed $3 billion in revenue, said Convergys, whose top customers include AT&T Inc (T.N) Comcast Corp (CMCSA.O) and DirecTV (DTV.O).

Convergys will buy Stream from Ares Management and Providence Equity Partners, as well as from LiveIt, the business process outsourcing investment arm of Ayala Corp.

Stream's private equity owners turned down an offer from Trillium Capital LLC - owned by Stream founder and former CEO R. Scott Murray - to buy the company for $4.65 per share in 2011. The offer had valued Stream at about $575 million. Stream subsequently was taken private in 2012.

"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," Convergys's Chief Executive Andrea Ayers said.

Eagan, Minnesota-based Stream, which has 40,000 employees, provides customer relationship management services in 22 countries and 35 languages. Convergys will have about 125,000 employees following closure of the deal, expected in the first quarter of 2014.

Convergys will finance the deal with $400 million cash on hand, a new $350 million term loan for which the company has received a commitment letter from Citigroup Global Markets Inc and BofA Merrill Lynch, as well as existing credit facilities.

Convergys, which expects the deal to yield yearly cost savings of about $25 million on completion, also stood by its 2013 forecast for adjusted profit of $1.10 per share and revenue of $2.05 billion, in line with analysts' estimates.

Centerview Partners LLC acted as financial adviser to Convergys on the deal, while Robert W. Baird & Co advised Stream.

Last year, Convergys acquired the business process outsourcing operations of New Zealand-based Datacom.

Shares of Convergys were at $24.26 in extended trading after closing at $20.86 on the New York Stock Exchange on Monday.

(Reporting by Soham Chatterjee; Editing by Maju Samuel)

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