Datalex, the Dublin-based airline and transport software company, plans to float on the stock exchanges in New York and Dublin later this month. Some 16,775,000 Datalex shares, or about 24.5 per cent of the company, will be sold to raise a net $96 million (€110.55 million).
Datalex will use the funds raised to expand its branding and marketing geographically, to invest in further research, development and technical resources as well as for further acquisitions. The target share price range of €7.61 to €8.31 per share in Dublin and $12.50 to $14.50 per American Depository Share (ADS) in New York would value the company at between $428 million (€369 million or £470 million) to $497 (€429 million or £547 million). At the mid-point of the share price ranges, the company would be valued at $462 million (€399 million or £508 million). Each ADS will be equal to two ordinary shares.
The shares are to be priced on October 19th and conditional dealings are scheduled to start on October 20th with unconditional dealings starting on October 26th. The New York listing - on the technology-heavy Nasdaq market - will be the company's primary listing, while the secondary listing in Dublin is aimed at attracting a substantial Irish shareholder base. Datalex will issue 15,855,357 shares, while a number of the existing shareholders, including founder and chief executive Mr Neil Wilson, will sell a total of 919,643 shares. The shares will be allocated following presentations to potential investors in Ireland, the US and Europe which are now under way.
Finance director Mr Liam Booth said no decision had been made on how the shares would be split between the various markets. "It will depend on the demand and the decision will be made on the pricing date," he said. An additional 2,516,250 shares will be made available to potential investors through a "greenshoe" option if demand is strong.
While Datalex is a fast-growing company producing good revenue growth, it is a loss-making operation largely because of investment to reorganise towards e-business and goodwill and other write-offs. It reported a pre-tax loss of $30.3 million for 1999 on a pro forma basis followed by losses of $49 million for the six months to end June which included $35 million for non-cash items including share compensation expense write-offs.
While company sources were optimistic that Datalex could return to profits within a year to 18 months, it warned in its prospectus that as a developing company it "may decide to defer profitability in favour of continued investment in opportunities we identify to grow our business". In its prospectus the company also warned that it expected "to incur significant losses for the foreseeable future".
Set up in Dublin in 1985, the company produced its first product in 1987. Its accounts show that the company was profitable for its first 13 years. In 1998, the company decided to refocus towards providing Internet-based services. At that time it sought new capital and Enterprise Ireland, ICC Venture Capital and Mr Dermot Desmond's IIU investment company took shares in Datalex.
The company is now targeting the e-business markets providing infrastructure and solutions for the travel and airline industry. Customers include travel suppliers including Aer Lingus, American Airlines, British Airways, Delta and KLM, industry intermediaries including Trailfinders, e-bookers and American Express and travel consumers. In 1998 Datalex had 30 staff in Dublin. It now has 450 staff in 12 locations, with 145 of them in Dublin.
Stressing the growth potential of the business, Datalex chief executive Mr Wilson said the global annual expenditure in the travel and transport market was worth $3.5 trillion, or 11.7 per cent of world gross domestic product. The sector was very suitable for transactions by e-business and it was difficult for pure technology companies to enter this specialised market, he argued. In 1995 there were no travel bookings by Internet while in 1999 over $6 billion worth of Internet bookings were Web-based with business estimated to rise to $30 billion within two to five years.
Outlining its strengths, Mr Wilson said Datalex had strong strategic relationships as well as good strategic partners, focused customer management to ensure repeat business - about 50 per cent of the current revenue base comes from repeat business - and a strong management team.
But the prospectus outlines a number of risks for investors - the company's short operating history in the e-business area, the outlook for the development of online travel booking and use of the Internet, a possible decline in the world travel market. Another risk for investors is that at the proposed share issue prices new investors will be buying in at a price per share well ahead of the Datalex net asset value per share.
Datalex has appointed Credit Suisse First Boston as the global co-ordinator and bookrunner for the issue. It will be assisted by Goodbody Stockbrokers and Robertson Stephens. Goodbody Corporate Finance is sponsoring the flotation.
