On Wednesday, The Goldman Sachs Group Inc. (GS) scrapped the cash deal announced in May 2013 to buyout Atlanta-based Ebix Inc. (EBIX), an insurance software provider. The decision came on the back of U.S. regulators’ investigations into allegations from short-sellers who accused Ebix of furnishing inaccurate financial statements.
Earlier, Goldman had agreed to buy Ebix for $820 million, including the latter’s outstanding debt. As per terms of the deal, it was agreed that shareholders of Ebix were to be paid $20 per share in cash by Goldman.
Further, as per the "go-shop" provision contained in the merger agreement, Ebix is still open to imploring other strategic alternatives from third parties. Therefore, Ebix's special committee is on the look out for other potential acquisition proposals.
Ebix is a software and e-Commerce services provider to the insurance and financial industries. Products provided by the company include data exchanges, agency systems, carrier systems and custom software development.
Though the company denied such accusations, yet its stock price has gone down 37% since the first charge was levied against it in Mar 2011. However, no termination fees will be paid by either of the companies.
Earlier, Goldman was extremely confident regarding Ebix and believed that the company had no involvement in such malpractices. Therefore, Goldman was contended with the deal and was hopeful of taking Ebix to new heights and maximizing its growth potential.
However, since the investigations began, Goldman decided against moving forward with the transaction as the deal was planned to be financed with its own capital. Therefore, amid ongoing fundamental pressures and regulatory obligations in the banking sector, we believe Goldman took the right decision by not entering into an ambiguous deal.
Currently, Goldman carries a Zacks Rank #2 (Buy). Other major banks with a Zacks Rank #2 that are worth considering include Comerica Incorporated (CMA) and JPMorgan Chase & Co. (JPM).
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