Datalex, the travel retail software provider to airlines, launched a €25 million equity raise on Friday as it seeks to get funding to repay expensive loans from its main shareholder, businessman Dermot Desmond, and ensure it has enough working capital.
Mr Desmond’s IIU investment vehicle, which owns 29.8 per cent of Datalex, is taking part in the equity raise to the extent that it will see his stake rise to about 40 per cent, breaching the 30 per cent threshold that would ordinarily require the billionaire to make a full bid for the company under stock market rules.
Waiver
However, the Irish Takeover Panel has granted Mr Desmond a waiver, subject to it being rubber-stamped by other shareholders at an extraordinary general meeting.
The planned fundraise involves three steps. Firstly, IIU and another shareholder, Pageant Holdings, and its founder, Nick Furlong, have committed to buying up €14.7 million of new shares in a so-called cornerstone placing. Meanwhile, Datalex's corporate broker Goodbody Stockbrokers sold €4.2 million of shares to stock market investors in a firm placing on Friday.
The third element will comprise a planned €6.1 million “open offer” share sale among existing investors over the next three weeks. Mr Desmond and Mr Furlong will be subscribing for some of these shares, while Goodbody found conditional buyers for the remainder on Friday, in the event that demand from existing shareholders is not enough.
Mr Desmond’s Tireragh vehicle provided Datalex with €11.3 million of emergency loans in 2019 as the company dealt with the fallout from an accounting scandal.
He agreed an additional €10 million debt facility last year, but Datalex did not need to draw it down. The existing loans, which carry a 10 per cent interest rate, fall due in September 2022.
Datalex said it plans to use most of the €23.7 million net proceeds from the equity raise to repay the Tireragh loans, which, together with accrued interest, now amount to about €16 million.
The balance of the funds will be used for “the funding of working capital to support implementation of new revenue opportunities and an acceleration of the company’s investment in its product roadmap”, it said.
Revenues
Datalex’s revenues slid by 38 per cent to $28.1 million (€23.2 million) last year, when the company’s airline customers suffered their worst year on record as Covid-19 brought international travel to a virtual standstill. Airlines use Datalex software to manage air fare sales and pricing, clock up seat and baggage fees, and make car, hotel and insurance bookings.
However, the company said at the announcement of its 2020 results in April that it was seeing a growing pipeline of potential work as airlines begin to plan for a post-Covid world.
"Today marks an important milestone for the group. We are preparing for the next stage towards growth, and it is important that the group has the right capital structure in place for this phase," said chief executive Sean Corkery. "Whilst 2021 remains a challenging time for the airline industry, we have seen, in recent months, an increase in potential opportunities.
By strengthening our balance sheet and raising additional working capital, the group is stepping forward in a much better position to capitalise on these opportunities.”
Datalex plans to move its shares from the main Euronext Dublin market to the junior Euronext Growth market, which will reduce administrative and regulatory requirements and also allow the company to avoid having to produce a prospectus to complete the capital raise.
