netGuru, Inc. has entered into definitive agreements to merge with privately held BPO Management Services, Inc. (BPOMS) and divest its Indian engineering business process outsourcing operations and related assets.
The proposed merger would result in BPOMS becoming a wholly-owned subsidiary of netGuru, with BPOMS' stockholders exchanging their shares of BPOMS common stock and preferred stock for shares of netGuru common stock and preferred stock, and netGuru assuming the obligations under BPOMS' outstanding options and warrants. It is anticipated that BPOMS stockholders would then hold approximately 90% of netGuru's equity interests that would be outstanding immediately following the consummation of the merger, excluding most new equity or equity-based securities, if any, issued by netGuru or BPOMS after August 29, 2006. The divestiture of the Indian operations would occur simultaneously with the merger and involve the transfer of netGuru's Indian subsidiary and certain additional assets and liabilities to an entity owned and controlled by affiliates of netGuru, Inc.
In connection with the merger and divestiture, netGuru would declare a cash dividend and conduct a reverse stock split. If declared, the cash dividend would be approximately $3.5 million, or approximately 18 cents per share of netGuru common stock outstanding prior to the planned reverse stock split, and would become payable out of $1.5 million in cash expected to be provided by BPOMS in the merger and $2.0 million in cash expected to be received by netGuru from the divestiture.
After the declaration of the dividend but prior to the payment of the dividend and consummation of the merger, netGuru would effect a 1-for-30 reverse stock split of its approximately 19.2 million outstanding common shares. In addition, netGuru would create three series of preferred stock containing, among other terms, various conversion, liquidation, redemption, voting, director election, and board observation provisions. Shares of BPOMS preferred stock would convert into shares of the newly created netGuru preferred stock at the closing of the proposed merger.
If all closing conditions are met, the merger and divestiture are anticipated to be completed by December 2006. After the merger and divestiture are completed, the Company's remaining operations -- Web4 enterprise content management software and netGuru Systems -- would be integrated into BPOMS' existing operations. BPOMS' management team would assume the Company's executive and other management positions, although it is anticipated that netGuru's chief financial officer, Bruce Nelson, and chief operating officer, Koushik Dutta, will retain their current positions. In addition, directors selected by BPOMS would assume most or all positions on the Company's board of directors, including chairman. The Company would also change its name to BPO Management Services, Inc., to reflect its new primary business of providing business process outsourcing and IT services, and apply for a new trading symbol.
Patrick Dolan, BPOMS' chief executive officer, commented: "We believe our merger with netGuru would provide not only access to the capital markets to support future growth but also key software and technology to complement and strengthen our existing operations. Demand for back-office business process outsourcing services, especially from the under-served middle market, is rising, and with economic and business growth continuing, we feel this merger represents a timely and strategic move."
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