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Tampa's Sykes agrees to buy outsourcing company ICT Group for $263M

Workers add the Sykes name to the company’s headquarters in Tampa in 2006. The company, which has 33,000 employees, has weathered the recession better than most.

JOSEPH GARNETT, JR. | Times (2006)

Workers add the Sykes name to the company’s headquarters in Tampa in 2006. The company, which has 33,000 employees, has weathered the recession better than most.

Tampa-based Sykes Enterprises has agreed to buy fellow outsourcing firm ICT Group Inc. for $263 million in a deal that catapults Sykes into the bay area's top 10 largest public companies.

The acquisition announced Tuesday — the largest in Sykes' 32-year history — creates a combined company with $1.2 billion in revenue, more than 50,000 employees and a global footprint of call centers in 23 countries.

It gives Sykes an entry point into Mexico, India and Australia, adds customers in new categories like health care and government and is a big boost to Sykes' network catering to financial services companies.

Chuck Sykes, president and CEO of the firm founded by his father, called the acquisition "a significant milestone."

Sykes told investors in a conference call Tuesday that he has been asked for two years when the company would use its accumulating cash to strike with a major acquisition. The fit he was looking for, Sykes said, had to complement the company's core business, expand its client portfolio and fit culturally.

"This discipline paid off," he said. "We had a great complementary combination here."

Asked about job cuts and possible call center site closings, Sykes said there will certainly be "plans to adjust," but it was too soon to discuss specifics.

Throughout the recession, cost-conscious large customers have increasingly cut back on the number of outsourcing companies they use — sometimes whittling down to one or two providers. That in turn has spurred mergers affecting several information technology companies that provide behind-the-scenes office support for businesses. Last month, Xerox Corp. announced it is buying Affiliated Computer Services for $5.5 billion and Dell Inc. said it is buying Perot Systems Corp. for $3.9 billion.

Begun as a small engineering firm in Charlotte, N.C., Sykes moved its headquarters to Tampa in 1993. Spurred by going public three years later, Sykes grew into a major call center operator with 33,000 employees. Though the vast majority of that work force is far from the bay area, Sykes has an iconic presence here, putting its name on its headquarters in the distinctive "Beer Can" building in downtown Tampa.

Sykes has weathered the recession and last fall's Wall Street turmoil better than most; in 2008 it was the sole major public company based in the Tampa Bay area to end the year with a higher stock price.

ICT Group, a 26-year-old company headquartered in Newtown, Pa., boasts 18,000 workers in more than 40 call center locations.

"We have spent the last 18 months transforming our organization and positioning the company for profitable growth," said John Brennan, ICT Group's chairman, CEO and president. "Upon completion of (this) merger, we will have the resources and footprint to address the increasingly complex needs of our Fortune 500 client base."

Brennan and other members of his family who control a combined 39 percent of the company's shares have contractually agreed to vote for the merger.

Though both are sizeable players, there is little overlap between Sykes and ICT Group in terms of geography and client roster. Out of the top 15 clients for both companies, there is only about $15 million in overlapping business.

Sykes said the deal will provide cost savings of up to $20 million a year and push Sykes to exceed its previous, high-end expectations of posting 31 cents to 34 cents a share in third-quarter earnings. The acquisition, paid for half in cash and half in Sykes' stock, is expected to close by year's end.

Sykes is paying $15.38 per share for ICT Group, a 46 percent premium on the company's Monday closing price. Stock of ICT Group surged 45.5 percent, or $4.80 per share, to close at $15.35 Tuesday. Shares in Sykes rose 12.7 percent, or $2.56, to close at $22.71.

Jeff Harrington can be reached at [email protected] or (727) 893-8242. Follow him on Twitter at twitter.com/jeffmharrington.

FAST FACTS

Sykes Enterprises

Headquarters: Tampa

Founded: 1977

2008 revenue: $813 million

Employees: 33,000

Reach: More than 45 centers in 20 countries


ICT Group

Headquarters: Newtown, Pa.

Founded: 1983

2008 revenue: $428 million

Employees: 18,000

Reach: More than 40 centers in North America, Europe, Latin America, Australia, India and the Philippines.

• • •

What they do

Help companies manage customer service and their business processes through a global network of call centers.

Sources: Sykes.com, ITCGroup.com


Sykes time line

1977: Sykes founded in Charlotte, N.C., as a three-employee engineering firm.

1993: John Sykes moves his young company, choosing Tampa over St. Louis and Dallas for its "progressive business climate, quality of life and strategic location to our global markets."

1996: Sykes goes public, its stock trading on NASDAQ.

1997: University of Tampa John H. Sykes College of Business is named after Sykes' $10 million gift, the school's largest at the time. Other noteworthy philanthropy followed, including gifts to the Florida Orchestra and United Way.

2004: Chuck Sykes appointed president and CEO.

2006: Sykes has more than 26,000 employees.

2009: Sykes makes its largest acquisition with the purchase of ICT Group Inc.

Source: Times files, Sykes.com


Moving Up

Sykes was the 13th largest public company in the Tampa Bay area in the latest St. Petersburg Times' ranking. Based on this acquisition and the pending departure of Walter Energy's headquarters, Sykes would rank ninth. Here were the 10 largest public companies, by revenue, with headquarters in the bay area, based on the companies' most recent fiscal year.*

Company Revenue

Tech Data $24.1B

Jabil Circuit $12.8B

Gerdau Ameristeel $8.5B

WellCare $6.5B

TECO $3.4B

Raymond James $3.2B

HSN $2.8B

Lincare $1.7B

Walter Energy $1.5B

Kforce $997M

*as of May 2009

Tampa's Sykes agrees to buy outsourcing company ICT Group for $263M 10/06/09 [Last modified: Wednesday, October 7, 2009 10:07am]
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