The merger of Indian business process outsourcing firm Aegis, which counts Flipkart and Paytm as customers, with US-listed StarTek has been designed to avoid vesting of warrants issued to Amazon if it closes before July 23, the American company told the US Securities and Exchange Commission.
In March, Capital Square Partners announced a plan to merge Aegis with Startek, which would result in the PE firm taking a controlling 55% stake in the combined company.
E-commerce giant Amazon held warrants that it could vest for shares allowing it to take a large stake in Startek after it provided $600 million in revenue or if there was a change in control at the BPO firm. ET had reported that this could cause concern for some of Aegis’ existing ecommerce clients who compete with Amazon.
Startek CEO Chad Carlson had told ET that the company would give details about the Amazon warrant in its proxy filings with the US securities regulator.
“The Aegis Transactions as structured are intended to constitute an Excluded Transaction. However, if the Aegis Transactions were to close after July 23, 2018 and Amazon does not agree to extend such date, then the Aegis Transaction would constitute a Change of Control Transaction and consummation of the Aegis Transactions would result in the accelerated vesting of the Amazon Warrant,” Startek told the SEC. About 400,000 shares have already vested as part of the warrant agreement. Amazon has the right to buy upto 4 million shares.
Under certain circumstances, the failure to close the deal by July 23 and the potential vesting of the Amazon warrants could result in Startek having to pay CS Partners a multi-million dollar breakup fee.
Startek also announced that the $700 million combined company would have a new CEO after the merger was completed.
“Part of the proxy process includes naming individuals who will serve in key leadership positions and on the board of directors for the combined entity. While many decisions about the leadership team are still being thoughtfully considered, I would like to introduce Brand Warrior nation to Lance Rosenzweig who is expected to serve as our future chief executive officer and as a director after the closing of the transaction, which is expected to happen sometime in the third quarter,” CEO Chad Carlson told employees in an email. Carlson will continue as chief innovation officer once the deal closes.
Rosenzweig had served as the chief executive officer of Aegis USA and chief executive officer PeopleSupport, Inc., which was sold to Aegis.
The company also disclosed the composition of the new board. Rosenzweig will be on the board with at least eight other leaders – five of whom will be designated by Capital Square Partners and three independent directors.
The US-listed company also said one of its three top customers – telecom player Sprint – had said it was stopping all business with Startek.
“On March 9, 2018, we received an unsigned letter from Sprint purporting to notify us that they would be eliminating all business with us by June 29, 2018, unless mutually agreed otherwise by the parties. The unsigned letter is not effective notice under the terms of the contract between the parties and we remain in discussions with Sprint regarding termination and exit,” Startek said.
Sprint contributed over 10% of Startek’s revenue in 2017. The company took an impairment charge of over $2 million relating to the customer relationship asset.
thanks you RSS link