Ebix Inc. jumped to its highest price in almost six months and topped a $20-a-share takeover bid from Goldman Sachs Group Inc. that would take the supplier of insurance software and services private.
Shares of Ebix rose as much as 14 percent to $21.25, the highest intraday since Nov. 5, before settling to $20.36 at 12:51 p.m. in New York. Goldman Sachs agreed to pay 18 percent more than the average daily closing price for the last 30 days, Atlanta-based Ebix said today in a statement.
The bid from Goldman Sachs is at least $6 a share too low, said Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC, an asset manager and merger adviser in New York. Intuit Inc., the developer of financial management software, may be a potential strategic buyer, Feinseth said. Robin Raina, Ebix’s chairman and chief executive officer, and his Rennes Foundation own about 19 percent of the shares and are voting for the deal.
“I’m a little surprised that Robin is selling at this price,” Feinseth said. “If you really look at its value to a financial or strategic buyer, I think it’s greater.” Some Tigress clients own Ebix stock, he said.
Ebix has 45 days to solicit other offers, according to the statement. A special committee of independent directors unanimously supported the Goldman Sachs bid, which the companies valued at $820 million including assumption of outstanding debt. At current prices, the company’s stock market value is about $756 million.
“We have great respect for Ebix and its strong commitment to providing customers with the highest quality of software and e-commerce services in the insurance industry,” Sumit Rajpal, a managing director at New York-based Goldman Sachs, said in the statement. “We look forward to working with the company and helping it maximize its growth potential.”
Goldman Sachs’s affiliate company Exchange Parent Corp. is acquiring Ebix, according to a filing today. The bank is pursuing the deal mainly with its own capital rather than through private-equity funds, according to a person briefed on the matter. Some of the stake may be sold off to other investors after the deal is closed, the person said.
Goldman Sachs has used similar tactics before. In January, the bank’s real estate principal investing area joined with Greystone Real Estate Partners LLC to buy 27 multi-family properties from Equity Residential for $1.5 billion. In April, Ivanhoé Cambridge, an arm of Canadian fund manager Caisse de depot et placement du Quebec, bought into the deal.
Rajpal works for Goldman Sachs Capital Partners, which is still investing its sixth fund that raised $20.3 billion in 2007, according to the bank’s website.
Ebix said in March that 2012 net income fell 1 percent to $70.6 million as revenue increased 18 percent to $199.4 million. The company said in a filing today that it doesn’t expect any management changes or staff cuts as part of the deal.
Bloomberg News in November reported that Ebix was being investigated by the U.S. Securities and Exchange Commission for its accounting practices. Raina said at the time he was not aware of any probe.
In March 2011, Ebix said it was the target of short sellers after an anonymous blogger posted a critical analysis of the company’s earnings on the website Seeking Alpha. The shares fell 24 percent to $22.52 two days after the post appeared.
The short interest on Ebix equaled 34 percent of the shares available to trade as of April 15, according to data compiled by Bloomberg.
“They have grown through a lot of small acquisitions, and companies that tend to grow through acquiring small pieces tend to accumulate a lot of goodwill,” which attracts short-sellers, Feinseth said. “The desire to get out of the public market and the public spotlight is probably a major motivating factor here.”