
Singapore's Capital Square revises StarTek take-private bid

Singapore-based private equity firm Capital Square Partners is continuing its bid to privatise US-listed outsourced customer engagement platform StarTek, having revised its targeted valuation downwards in the wake of market volatility.
Capital Square took a majority stake in StarTek in 2018 when the business merged with one of its portfolio companies, India-based Aegis. It continues to own 56%, according to a filing. Last December, the private equity firm offered to buy all outstanding shares for USD 5.40 apiece. The offer has now been amended to USD 4.65 per share, valuing StarTek at USD 187m.
The company’s stock closed up 11% at USD 3.71 on August 9 and it remains around that level. The stock is down 30% year-to-date and down by almost two-thirds from where it was when the merger was announced.
A reverse merger with a US-listed peer was on Capital Square’s agenda when it acquired Aegis in 2017. The business process outsourcing (BPO) company had been hampered by financial problems at its parent, Essar Group. Operations were divested in the US and the Philippines, and key markets like Malaysia, Saudi Arabia, and India were unable to make up the shortfall amid rising competition.
Capital Square took out Essar, paying USD 270m-USD 300m, and soon began positioning Aegis as a suitable acquisition target for a US-listed BPO player. It helped that the GP had already gone through a similar process with Minacs Group, which was sold to US-based Convergys in 2016.
At the time, StarTek was loss-making, overly dependent on business from three of the four largest US telecom network operators, and it was looking to become more international. Annual revenue was USD 400m, generated from 47 call centres across 10 countries.
StarTek now offers a range of omnichannel customer engagement and digital and artificial intelligence-enablement services to 250 customers across the financial services, technology, telecom, healthcare, travel and hospitality, and utilities sectors. It employs around 40,000 customer service executives based in 46 facilities in 13 countries.
Revenue came to USD 703.5m in 2021, up from USD 641.8m a year earlier, while a net loss of USD 33.6m swung to a net profit of USD 9.7m.
Capital Square, which continues to operate on a deal-by-deal basis, has a portfolio of India-related IT services businesses. Others include CSS Corp and Indecomm Global Services, which it has held since 2013 and 2017, respectively.
CSS was a USD 270m joint acquisition with Partners Group. Last year, Capital Square took out Partners Group for an undisclosed sum. StarTek participated in the transaction, contributing USD 30m for a 26% interest and reserving the right to assume a controlling stake.
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