FollowWith a US probe into the operations of US insurance software maker eBix intensifying, Goldman Sachs Group (GS) has made a $820 million offer to shareholders in order to delist and privatize the company.
The bid amounts to $20 a share and made the share price of eBix jump to $20.60 on Nasdaq yesterday. The latest price in New York is $19.55, down 5.1% from yesterdays close. eBix are allowed to seek competing bids which may cause the share price to rise even further within the next couple of days.
If no higher bid is received Goldman will become the new owner of eBix which is under investigation by the Securities and Exchange Commission and now also the Internal Revenue Service.
eBix CEO Robin Raina denies that the software maker is under investigation by the SEC. Other spokesman for the company said that the public statements on accounting and tax issues remains unchanged and refused further comment.
Goldman’s managing director, Sumit Rajpal, said that they were looking forward to working with eBix and had no further comments on the investigation by the SEC.
The IRS is looking into irregular bookings of US revenue to overseas entities in Singapore and India according to leads at eBix who wish to remain anonymous. This was apparently done to keep the US tax rate low on its earnings. Should eBix be found guilty of misconduct by the IRS then it risks a higher tax charge.
The company is facing lawsuits that are in an advanced stage of exchanging evidence. According to the cases the management of eBix made several materially false and misleading statements from 2009 to June 2011. eBix financials do disclose the lawsuits but says that the financial outcome cannot be determined.
eBix annual revenue has grown to over $200 million per year from $12 million due to numerous acquisitions. It was one of the best performing small cap tech shares according to Forbes and Fortune magazines and it share price reached a peak of $30 per share in 2011.
However the share price dropped back down to $22.50 after Copperfield Research in a blog accused the management of eBix of misconduct. Gotham City Research also accused the management of eBix of not disclosing a related party loan agreement at its Singapore office to the SEC. In its defense the management of eBix said that the loan didn’t need to be disclosed in the consolidated financial statements.
