Almost two months after agreeing to buy Ebix (NASDAQ:EBIX) for $20 per share, Goldman Sachs (NYSE:GS) and the insurance software provider announced yesterday they have decided to terminate the merger after the U.S. Attorney for the Northern District of Georgia began investigating allegations of misconduct at Ebix.
The software maker said it received a letter on June 14 advising it an investigation had been opened based on information contained in class action lawsuits filed against the company alleging intentional misconduct, as well as that brought to light by the media and a subsequent SEC investigation.
"We believe the allegations in the class action suits are without merit," Ebix CEO Robin Raina was quoted as saying in yesterday's press release.
The allegations of misconduct are legion. Back in 2011, class action lawsuits were filed against Ebix claiming false statements made in earnings reports, SEC filings, and various public pronouncements. Last November, Bloomberg disclosed the existence of an SEC investigation of the software maker's accounting practices, which Ebix's CEO denied at the time, saying the story was "inaccurate and misleading."
However, Ebix subsequently said it received a subpoena from the SEC in December relating to the investigation Bloomberg had mentioned and then got a second subpoena this past April related to information contained in the class action lawsuits.
Short-sellers have also attacked Ebix, raising concerns about related-party transactions that allegedly went unreported in its SEC filings, which again had the software provider denying any wrongdoing.
In the midst of these investigations and allegations, Goldman Sachs made an offer to take Ebix private for $820 million cash, which it now has decided not to do. Ebix notes that there will be no termination fee paid for the failed bid and that both sides release each other from claims that could arise from the failure. The merger had been announced May 1.
Saying the company is focused on running its business, Raina said in a statement: "We want to thank Goldman Sachs for their interest in acquiring Ebix and we are naturally disappointed that we could not complete a transaction at this time."
The board of directors has said they'll explore other strategic alternatives for the company.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Ebix and Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.