Goldman Sachs Group, Inc. (NYSE:GS) has decided to take insurance software maker Ebix Inc. (NASDAQ:EBIX) private as regulatory probes are said to intensify, people familiar with the matter told Bloomberg. Yesterday, Goldman Sachs Group, Inc. (NYSE:GS) announced they would buy Ebix Inc (NASDAQ:EBIX) for $820 million or $20 per share in an all-cash deal. Ebix Inc (NASDAQ:EBIX) board of directors immediately approved its merger with the banking giant. However, the proposed merger is yet to receive antitrust approvals.
SEC and IRS Investigations
The “go shop” option allows the Atlanta-based company to seek competing bids in the next 45 days. If it doesn’t receive a better offer, Goldman Sachs Group, Inc. (NYSE:GS) will own the company which is already under scrutiny by SEC. The Securities and Exchange Commission conducted a probe in November last year, and interviewed past company employees. Some people briefed on the matter told Bloomberg, and asked not to be named as he isn’t authorized by SEC to discuss confidential issues. Moreover, Ebix Inc (NASDAQ:EBIX) is also under an IRS investigation.
However, Ebix Inc (NASDAQ:EBIX) CEO Robin Raina rubbished all the reports, saying that there was no SEC probe in November. Reports said that the Internal Revenue Service is investigating into how the company books revenues from sales made in the U.S to business units overseas, especially in India and Singapore where it enjoys low tax rates.
Rapid Growth Over The Past Decade
Over the past decade, Ebix Inc (NASDAQ:EBIX)’s revenues surged from $12 million to $200 million due to several acquisitions, while net income rose from $500,000 in 2002 to $70.1 million in 2012. It was recognized as the fastest growing technology company in the United States. The company’s market value surpassed $1 billion in 2011. As the stock began to surge, short-sellers started questioning the company’s business strategy and its heavy dependence on low-tax rate countries like India and Singapore.
Ebix Misleading Investors
In February, short-seller Gotham City Research questioned its accounting practices and tax strategies. Gotham City revealed that there was a $65.8 million related-party loan on Ebix Inc (NASDAQ:EBIX)’s Singaporean unit which the company never disclosed in SEC filings. Gotham City warned that if Goldman Sachs Group Inc. or any other company acquires Ebix Inc (NASDAQ:EBIX), they will regret it.
Goldman Sachs Group, Inc. (NYSE:GS) shares declined 0.21 percent to $142.30, while Ebix Inc (NASDAQ:EBIX) fell 5.05 percent to $19.56 at 11:47 AM EDT.