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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study #17

ClientLogic acquiring SITEL Corp.

Dear Colleague,

On October 13, 2006, ClientLogic Corporation of Nashville, Tenn., a subsidiary of Canadian conglomerate Onex Corporation (TSX:OCX) announced it is acquiring Omaha, Nebraska – based SITEL Corporation (NYSE:SWW). The transaction will be approximately $450 million including $4.05 cash per SITEL share, for an aggregate equity purchase price of about $310 million plus some $140 million of SITEL debt to be refinanced at closing. The acquisition will create one of the world's largest providers of outsourced customer support services with annual revenues in excess of US$1.7 billion.

The $4.05 to be paid in cash in the merger for each SITEL share represents a 33% premium to the volume-weighted average SITEL share price for the 30-trading day period ending October 11. With over 17 million shares traded on the day of the announcement, SITEL rose 38 cents to US$3.90, a gain of 10.8 per cent. SITEL has been delinquent in its filings and has not yet made public its 2006 numbers. Based upon the company's 2005 EBITDA of $63.2 million and over $1 billion in 2005 revenue, ClientLogic is paying 7.1x EBITDA and .43x revenue.

ClientLogic with 2005 revenues of US$591 million was formed by Onex in 1998. Onex, has invested approximately $220 million in ClientLogic and owns approximately 68% of the company, controlling some 89% of its voting stock.

ClientLogic has become a provider of outsourced customer care, serving clients in a broad range of industries. SITEL, is a provider of outsourced customer support services, handling more than two million customer interactions daily. The combined company will operate from more than 145 centers in 28 countries. ClientLogic will gain SITEL's operations in call centre hotspots like the Philippines, which is considered to be the second largest U.S. outsourcing centre, beaten only by India. Additionally, it will fill the gap with financial departments that handle credit card and banking bills as well as technical support through phone services and e-mail responses.

“Growing market demand for bigger, more complex customer-care BPO solutions requires larger service providers with increased geographic presence, capacity and service capabilities”, said Dave Garner, President and CEO of ClientLogic. “Our mission will be to deliver the BPO industry's highest-quality services, while providing our clients with the strategic insight, scale and diversity of offerings to guarantee success.”

Jim Lynch, Chairman and CEO of SITEL Corporation, said, “Our board and our financial advisor Citigroup reviewed numerous opportunities while searching for strategic alternatives that would create the greatest value for our shareholders. Based on this review, it was clear to SITEL’s board that the offer from ClientLogic represents the best alternative to create significant shareholder value.”

The SITEL purchase requires majority approval by SITEL shareholders. So far, shareholders representing 31 per cent of the shares have agreed to vote in favor of the transaction, though a shareholder meeting won't be held until early 2007.

The deal carries a break-up fee to be paid to ClientLogic of 3.5% of the purchase price and up to $1.5 million in expenses if the transaction does not go through.

We hope that you find this feature from Sokoloff & Co. interesting, informative and useful.  We welcome your comments and suggestions. 

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