Global BPO Services to buy Stream for $225.8m

Source: Global BPO Services

Global BPO Services Corp. (Amex: OOO.U) announced today that it has entered into a definitive acquisition agreement to acquire 100% of the outstanding equity in Stream Holdings Corporation ("Stream"), a leader in providing global customer relationship management ("CRM") and other business process outsourcing ("BPO") services to Fortune 100 companies.

The transaction values Stream at approximately $225.8 million. The merger has been unanimously approved by Global BPO Services Corp.'s Board of Directors and also has been approved by the Board of Directors and stockholders of Stream.

Global BPO Services Corp. ("GBPO") was created in 2007 as a special purpose acquisition corporation with the objective to acquire a business process outsourcing company. In October 2007, GBPO raised $250 million in an initial public offering. Deutsche Bank Securities Inc. was the sole-book runner and Robert W. Baird & Co. was the co-manager on the IPO.

GBPO conducted a diligent search of the market and examined many potential candidates in the BPO services industry since completing its initial offering. This search targeted primarily CRM, transaction processing, information services, document management and human resource outsourcing companies.

Stream provides CRM and other BPO services to leading technology, communications and consumer electronics companies. Stream has over 16,000 employees with 32 service locations in 16 countries, including the United States, Canada, Europe, North Africa, India and Latin America. GBPO expects Stream to have preliminary unaudited revenues of $483.8 million in the year ended December 31, 2007, as compared to $405.5 million in fiscal 2006. GBPO expects Stream to have adjusted EBITDA of approximately $23.3 million (preliminary and unaudited) for the fiscal year ended December 31, 2007 (see schedule below), as compared to adjusted EBITDA of $17.4 million for fiscal 2006 (see schedule below).

For 2008, GBPO projects that Stream should have revenues of between $525 and $540 million and adjusted EBITDA of between $33 million and $35 million. Subject to the timing of the closing of the transaction, GBPO believes that there are opportunities to enhance the operating earnings potential of Stream over its existing business plan by at least $15 million in 2009 through a combination of the following: introducing new complementary services, establishing additional offshore service locations, operating productivity improvements and enhancing the technology environment. After the effect of these projected earnings enhancements, based on Stream's current business plans, GBPO believes that Stream should be able to generate approximately $620 million to $650 million in revenues and an estimated $60 million to $65 million in adjusted EBITDA (as defined above) for the year ending December 31, 2009.

GBPO has agreed to pay $225.8 million, subject to certain adjustments for working capital, for 100% ownership of Stream. The purchase price will be paid by a combination of the assumption or replacement of existing debt and capital leases totaling approximately $72.2 million, cash payments of approximately $139.3 million and the issuance of approximately 1.8 million units, each consisting of a share of GBPO common stock and a warrant to purchase a share of GBPO common stock at a strike price of $6 per share, valued at $14.5 million in the transaction. The purchase price is subject to increase based on the timing of the closing. On closing of the acquisition, $7.5 million of deferred underwriting fees from the IPO due to Deutsche Bank Securities Inc. and Robert W. Baird & Company will also be paid. GBPO expects to have approximately $100 million of cash on hand after the closing.

Upon consummation of the acquisition, Mr. Rick Rosen, a Managing Director of H.I.G. Capital LLC, will join the Board of Directors of GBPO. The shares of GBPO issued in the transaction to the shareholders of Stream will be subject to a lock up period for nine months after the closing of the acquisition.

Scott Murray, who will continue to be Chairman and Chief Executive of GBPO after the closing, said; "Stream is one of the premier private CRM companies of scale in the market. We were attracted to Stream because of its well-known brand, its reputation for service excellence with its clients, its global service footprint, its strong process driven culture and its ability to serve as a platform for future BPO acquisitions. We believe that there are opportunities to improve the revenue growth, operating performance and enhance the technology environment of Stream under our executive management. Stream will be our platform company from which to build a large global BPO services company that offers many cross functional services to global clients in multiple jurisdictions located both on-shore and off-shore. We intend to invest in the front end technology to create a world class customer focused platform of scale. We also intend to expand Stream's existing service locations into emerging areas that might include China, the Philippines and South America. I am very excited to have Rick Rosen, a Managing Director from H.I.G. Capital, join our Board of Directors. Mr. Rosen has been responsible for overseeing H.I.G. Capital's investment in Stream and has an outstanding track record of helping build industry-leading business services companies."

Murray went on to say, "The Stream management team, led by CEO and President Toni Portmann, who is going to continue with the company post closing, has done a great job of building the Stream franchise, driving customer satisfaction, expanding its footprint and growing its revenue base over the past four years. We look forward to working closely with the Stream team to build a fully diversified and integrated service offering for its clients."

Prior to becoming Chairman and CEO of GBPO, Murray was CEO of 3Com Corporation, CEO of Modus Media, President of Stream and Chief Financial Officer of The Learning Company.

The closing of the transaction is subject to customary closing conditions, including termination of the waiting period under Hart-Scott-Rodino and the approval of the holders of the majority of outstanding shares of common stock of GBPO issued in the IPO. It is also subject to holders of less than 30% of GBPO's shares of common stock issued in the IPO electing to exercise their conversion rights. Assuming these conditions are met, GBPO anticipates completing the transaction in mid-2008. Bear, Stearns & Co. Inc. provided financial advisory services, including a fairness opinion, and WilmerHale provided legal services to GBPO in connection with the transaction.

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