Datalex shares soared on Tuesday after the embattled software company revealed its main shareholder, Dermot Desmond, is in talks to provide it with €10 million in extra funding that would take it to within a whisker of a stake that would trigger a mandatory takeover offer.
The Dublin-listed software provider to the travel industry said it may sell €3.9 million of new shares to the billionaire’s IIU investment firm, which already owns 26.4 per cent of the firm. Allowing for the dilutive effect of the fresh stock, IIU’s stake would rise to 29.9 per cent.
If IIU went beyond this threshold it would be forced by Irish company takeover rules to make a bid for the rest of Datalex unless it received a waiver from the Irish Takeover Panel.
In addition, Mr Desmond’s company is also in talks to provide Datalex with a conditional €6.1 million by way of a secured loan facility agreement.
“While discussions are at an advanced stage there can be no certainty that terms will be agreed with IIU,” the company said. “A further announcement is expected in the coming days.”
Representatives from IIU did not respond to a request for comment.
The market value of Datalex soared by almost 16 per cent on Tuesday afternoon to €63.3 million. Company shares had already spiked before the announcement.
Datalex’s value had slumped by as much as 75 per cent from €190.5 million over the past two months after it issued a profit warning. There had been growing concerns in the market in recent times about the group’s cash position, which stood at $8.8 million (€7.7m) at the end of December, having fallen by almost half within 12 months.
Largest project
The group warned on January 15th that 2018 earnings before interest, tax, depreciation and amortisation may come to a loss of almost $4 million (€3.5m). The market had been expecting a profit of about $16 million (€14m).
Datalex has been struggling to recover higher-than-expected costs from its largest project, known to be the overhaul of the digital commerce offering of German airline Lufthansa, as it was dogged by budget and timeline overruns.
The group also disclosed on the day of the profit warning that it may have misstated revenues and earnings for the first half of 2018, mainly due to how it booked income associated with the same project.
Datalex hired accountancy firm PwC Ireland in January to carry out an independent review of the issue. It is understood that a report on the matter may be concluded by the end of the month.
