West TeleServices Says No to Public Spotlight

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After less than two years in the public arena, West Teleservices has decided to buy back its shares and return to the calmer waters of private ownership. The buyback, representing a 15 percent equity interest with a proposed premium of 11.34 percent, is subject to approval from outside committee members to determine the advisability and fairness of the proposal.


The proposed move comes at a time when the company reports record revenues for the quarter. Citing strong growth in inbound and outbound services as the reason for the increase, second quarter 1998 revenue showed a 20.0 percent gain to $118.0 million from $98.4 million reported in the quarter ended June 30, 1997. Net income increased 26.9 percent to $11.0 million, over $8.7 million reported in the second quarter 1997. Diluted earnings per share rose 21 percent to 17 cents for second quarter 1998 compared to 14 cents in second quarter 1997. Earnings before deductions increased 28.7 percent to $24.2 million for the second quarter 1998, compared with $18.8 million for second quarter 1997.


The company finished the quarter on target, with a slight increase in overhead offset by decreases in direct costs -- a result of opening one new call center in the second quarter and a total of five in the first half of this year. One of the call centers began contributing revenue in the second quarter.


"In addition to our strong revenue growth and stable margins," said Troy L. Eaden, chief executive officer, "we earned an annualized 21 percent return on average equity for the quarter."


What's probably happening here is that the company is sick of the sea saw of the marketplace, said Laurie Kolbeins, managing director, Texada Capital Corp., Wayne, PA, an investment banking firm.


It is not clear, however, whether the company intends to stay private or it they are simply trading in their securities. The company would offer no comment prior to committee approval of the move.


"The West family wouldn't be buying back shares at this price if they didn't think it was a good buy," Kolbeins said.


The proposed acquisition price of $13.5 per share over the closing market price on June 30 of $12.13 is not a generous premium, Kolbeins said, in a market where average premiums range anywhere from 25 and 40 percent. The initial public offering price was $18 per share.


Founders Gary L. West and Mary E. West own 71.8 percent of the company's outstanding common stock with Eaden owning 13.4 percent.


The committee, appointed by the company's board of directors July 1, consists of outside directors William E. Fisher and Greg T. Sloma. The committee has retained BT Wolfensohn as its financial advisers and Debevoise & Plimpton as its counsel. BT Wolfensohn is a division of BT Alex Brown Inc.


There is always an issue of what is fair for stockholders, Kolbeins said. If it is deemed fair, then they will issue a proxy statement, soliciting the purchase of the shares.
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