Following its recent decision to reduce its work force by 14 percent by outsourcing its customer service and backroom operations to India, Indianapolis-based Conseco, Inc. announced that it would acquire exlService, an Indian company which specializes in providing office services.
The move won’t be a leap into the unknown. “Exl was founded in early 1999 by a group that included Gary Wendt, who had recently retired as head of G Capital Corporation,” said Conseco’s announcement. “While at GECC Wendt had been a pioneer in outsourcing business activities to India, generating significant added value from productivity gains and cost savings. He took the reins as Chairman and CEO of Conseco in mid-2000. Wendt and his wife own 20.3% of Exl; his relatives own an additional 9.4%.”
Under Wendt’s direction Conseco’s board has approved exchanging 3,410,854 shares of its common stock, valued at $14 per share, for the 11, 937,993 outstanding shares of Exl. Under the plan Wendt would receive 696,602 Conseco shares with a value of around $9.75 million.
However, as Wendt is actively involved in both sides of the acquisition, he “will be prohibited from realizing any value of those shares unless Conseco recovers its $52.6 million acquisition price through cost savings achieved from the venture and/or profits from third party business managed by Exl.” If this doesn’t happen by the end of his contract with Conseco in 2005, he’s agreed to forfeit the shares.
Conseco anticipates cutting 2000 jobs and relocating the affected services to New Delhi over the next 21 months. It estimates that cost savings will ultimately be $30 million annually, and its CEO now has an added incentive to see that happen.
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