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Outsourcing firm PeopleSupport (PSPT) on Monday agreed to be acquired by Aegis BPO for $250 million. According to terms of the deal, Aegis, a subsidiary of India's Essar Group, will pay $12.25 a share for PeopleSupport, a 29% premium to its closing price Friday of $9.53.

In January, PeopleSupport said it wouldn't consider a $17 a share, $385 million offer from Philippine outsourcing firm IPVG Corp. and Asian private equity firm American Orient Capital Partners Ltd. because the buyers were either unwilling or unable to provide any evidence to assess their ability to fund the transaction. IPVG later withdrew its offer.

PeopleSupport rejected a $15 a share offer from the same parties in December of 2007, saying the offer price was "inadequate" and didn't take into account its strategic value and success in implementing its growth strategy. That $15 is looking pretty good today.

The acquisition remains subject to several conditions, including approval of PeopleSupport shareholders and a regulatory nod, but is not subject to any financing conditions. It is expected to close in the third or fourth quarter of this year. The acquisition will give Aegis outsourcing operations in India, the Philippines, the United States and Costa Rica.

In a research note put out after the announcement, Friedman, Billings, Ramsey & Co. Inc. analyst Matthew McCormack said at 7.5 times PeopleSupport's downwardly revised 2008 EBITDA estimate of $19 million, he believes the offer price is "fair." He said he does not expect IPVG will revive its bid for the company due to lowered expectations from PeopleSupport since the offers were first made, though IPVG has made a number of acquisitions since that time.

Credit Suisse Group served as financial adviser to PeopleSupport, and Pillsbury Winthrop Shaw Pittman LLP is the company's legal counsel. UBS and Edelweiss Capital are serving as financial adviser to Aegis, with Shearman Sterling providing legal support.

Source: PeopleSupport Agrees to $250M Acquisition by Aegis