Datalex, an ecommerce software provider to airlines, moved on Wednesday to raise €25 million in a multipronged share sale, with most of the proceeds being used to repay expensive loans from its largest shareholder, Dermot Desmond.
Mr Desmond’s IIU Nominees investment unit, which already owns 40.3 per cent of the company, may see his stake rise to as much as 52.5 per cent, depending on how many of the new shares he ultimately ends up buying.
Datalex owes another Desmond vehicle, Tireragh, some €19.1 million, including built-up and unpaid interest and fees. The loans currently carry an 18 per cent interest rate and are due to be repaid by the end of the year.
The remaining €5.2 million net proceeds from the share sale will be used for working capital and to invest in the company’s products.
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Datalex also plans to raise a minimum of €5 million early next year in a follow-on share sale, with the size and timing of that cash call to be “determined by the pace at which the board wishes to invest in its anchor solution and in new product offerings”.
“We are conscious that the current capital structure is not sustainable for Datalex,” said Jonathan Rockett, Datalex’s chief executive of 10 months.
The €25 million being raised, in a deal managed by Goodbody Stockbrokers, equates to almost half of Datalex’s current market value of €50.4 million.
Some €17 million of shares were sold on Wednesday at 45 cents each under so-called firm placing with IIU and other unnamed “key shareholders”.
Nick Furlong’s Pageant Investments own 8.3 per cent of the company, while the businessman owns a further 3 per cent personally. Sean O’Driscoll, the former chief executive of consumer electrical goods group Glen Dimplex, holds a further 5.3 per cent.
Datalex also plans to raise a further €8 million from smaller existing shareholders through an open offer that will run over the coming weeks.
Mr Desmond’s IIU has agreed to buy whatever new stock is not taken up by shareholders in this leg of the capital raise. His holding is expected to end up, as a result, between 40.3 per cent and 52.5 per cent.
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The Irish Takeover Panel agreed three years ago to waive a normal requirement that Mr Desmond make a mandatory takeover offer for the remainder of Datalex, after he pushed through the key 30 per cent stake threshold as a result of another €25 million equity raise.
The panel has agreed to extend the waiver to allow him to increase his holding, subject to approval from other shareholders at an extraordinary general meeting on September 26th.
Mr Desmond, a long-time investor, has been a consistent provider of finance to Datalex since it was rocked five years ago by an accounting scandal and, subsequently, the Covid-19 pandemic.
Under a turnaround management team that was led between 2019 and 2023 by tech industry veteran Sean Corkery, the company went from being one that built bespoke, and expensive, systems for airlines to essentially selling off-the-shelf products designed to help carriers get the most out of customers.
These include products for airlines taking direct bookings, taking more control over sales through online travel aggregators, and adapting fares for seats, baggage and other ancillary products in response to fluctuating demand.
Last year was something of a turnaround for the global aviation industry as passenger traffic volumes further recovered and airlines continued to invest in their ecommerce technology.
Datalex announced partnership renewals with Air China, Air Transat, JetBlue, Edelweiss and Aer Lingus last year, with some of them signing up to the company’s newest platform products. It also carried out an initial activation for EasyJet, a major new customer, in December.
However, Virgin Australia scrapped a plan to overhaul its retail offering, which hit Datalex and a number of other companies. In addition, Scandinavian airline SAS filed for bankruptcy protection last July, resulting in them not proceeding with a Datalex product. Some $3.5 million of revenues booked from these two customers last year will not be recurring in 2024.
Datalex also said on Wednesday that its revenues rose by 3 per cent in the first half of this year to $13.3 million (€11.8 million), while its earnings before interest, tax, depreciation and amortisation (Ebitda) loss narrowed to $2 million from $3.1 million.
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