Risk & Compliance

Hedge Fund Favors Flushing Poison Pill

Owner of a quarter of PeopleSupport's shares, Galleon Group finds its hands tied in trying to engineer a sale of the company.
Stephen TaubDecember 6, 2007

A prominent hedge fund is calling on PeopleSupport Inc. to rescind its poison pill or amend it in a way that would allow more potential acquirers to make a bid for the company.

IPVG Corp. and AO Capital Partners last week made an unsolicited bid to acquire PeopleSupport in an all-cash transaction for $15 per share. The company, which provides offshore business processing services, says it is studying the offer closely, but it recommended in a press release that sharehlders “defer making any determination in reliance upon IPVG and AO Capital Partners’ unsolicited proposal at this time.”

The hedge fund, The Galleon Group, owns about 24 percent of PeopleSupport and made its wishes known in a letter to Galleon founder and CEO Lance Rosenzweig. “Your poison pill prohibits us from entering into a constructive arrangement with a third party that might be interested in making an offer for the company. The net effect of the poison pill is to limit existing shareholder flexibility, throttle investor interest, and ultimately ‘chill’ the value of PeopleSupport.”

The hedge fund, which is run by Raj Rajaratnam and controls about $7 billion, urged the company to conduct an auction to elicit competing proposals for the company.

“We believe that given the substantial size of our investment in PeopleSupport and our existing relationships in the space, we can be instrumental in assisting PeopleSupport maximize shareholder value,” said Galleon.