Amazon To Buy A Stake In A Call Center Operator

Amazon has inked an agreement to acquire a stake in StarTek Inc, a customer-engagement outsourcing firm and a call center operator based in Colorado. The deal will see Amazon purchase shares of StarTek numbering up to four million earning the Greenwood Village, Colorado-based firm as much as $0.6 billion. StarTek disclosed the deal in a U.S. Securities and Exchange Commission filing.

Traditionally StarTek has concentrated on offering customer support services to cable television and telecommunication sectors and it is therefore not clear the kind of services that the online retailer gets from the call center operator. Over 60% of the revenues that StarTek generated in 2017 were derived from four corporations namely Comcast, AT&T, Sprint and T-Mobile US.

Diversification into retail

Across the globe StarTek, which was started more than three decades ago and has a market capitalization of $208 million, employs around 13,500 workers. Some of the countries it operates in include the Philippines, Jamaica, Honduras, Canada and the United States.

In recent years StarTek has diversified into sectors such as retail and healthcare. Per investor presentations of the company, clients from the retail sector constituted around 11% of the revenues that the call center operator generated in 2016. Previously that sector was too small for StarTek to break it out individually.

According to StarTek the approval of shareholders will not be required in order for the firm to transfer approximately 3.2 million shares to Amazon. However the approval of shareholders will be required to transfer the remainder – 777,000 shares. StarTek intends to seek approval at the next shareholder meeting. By September last year the biggest shareholders of StarTek were BlackRock, Dimensional Fund Advisors and Heartland Advisors.

Higher price target

Amazon’s deal to acquire shares in Startek come in the wake of the Seattle, Washington-based online retail giant’s stock being assigned a higher price target by Tom Forte, an analyst at D.A. Davidson. Per Forte, in a period of between 12 to 18 months the price target for the stock of Amazon is $1,800 with the acquisition of Whole Foods fuelling some of the growth opportunities.

“We see Amazon’s efforts at Whole Foods as iterative with the long-term goal of maximizing its grocery sales and leveraging an increased physical store presence to generate more online sales too,” wrote Forte.

The D.A. Davidson analyst also added that the e-commerce giant was likely to integrate the technology it has deployed at its Amazon Go cashier-free outlet to Wholes Foods stores saving the online retail labor costs and thereby presenting an opportunity for lower grocery prices.

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