Ebix modifies offer for Healthaxis, upping price

By Jennifer Chiou

New York, Oct. 9 - Ebix, Inc. made more changes to its offer for Healthaxis, Inc., including that it will now acquire 8,840,968 common shares of Healthaxis for $0.77 per share, up from $0.725 per share, in cash or the equivalent value in Ebix stock, valued at the floor value of $100.00 per share.

Recent changes also include that:

• All remaining warrants owned by any Healthaxis shareholder will be terminated;

• The existing remote resource agreement with Healthcare BPO Partners, LP, an affiliate of Tak Investments, Inc., will be terminated as a pre-condition to the merger;

• A good-faith attempt will be made to arrive at a new outsourcing agreement with Healthcare BPO Partners at revised terms on a post-merger basis, provided the economics make sense for Ebix;

• Healthaxis management and its board should make no strategic investments, dividend payments or material purchases between now and completion of due diligence;

• Healthaxis management and its board should not commit the company to any material long-term contracts, including but not limited to employment agreements, severance agreements, real estate or other leases, new options or restricted stock or warrant grants, between now and completion of due diligence;

• Healthaxis and its board should not make any bonus payments or any other compensation changes to the senior management, between now and completion of due diligence; and

• Healthaxis and its board should not make any payments toward early termination of existing contracts with partners, and not impose any new material financial commitments, between now and completion of due diligence.

If the offer is approved by the board of Healthaxis, Ebix noted that it is willing to work toward a closing in a period of 30 days.

Previous changes included a $500,000 termination fee payable to BPO Management Services Inc. if the Ebix offer is approved by Healthaxis shareholders. In late September, Healthaxis' board of directors rejected Ebix's original, unsolicited offer to acquire the company for $3.5 million in cash and $3.3 million in Ebix stock in favor of its agreement to be acquired by BPO.

As already reported, Ebix first revised its offer after it reviewed Securities and Exchange Commission filings by both Healthaxis and BPO.

According to Ebix, it previously received an "innumerable number of calls" from Healthaxis shareholders "conveying their understanding and concerns about the proposed merger with BPO."

In Ebix's Oct. 3 letter to the Healthaxis board of directors, it also proposed:

• Acquiring 740,401 preferred shares of Healthaxis held by LB I Group Inc. for a total of $610,831; and

• Paying Tak Investments $2.5 million for the warrants convertible to 3,333,334 shares of Healthaxis common stock. This money can only be received by Tak Investments in the form of equivalent-value Ebix stock, valued at the floor value of $100.00 per share.

Those electing stock will be given a one-year special put that will allow them to sell the stock back to Ebix within one year of the merger for $100.00 per share, Ebix said.

Ebix previously said its offer "represents a substantial premium over the proposed BPOM merger offer" and puts Healthaxis shareholders "in the driver's seat" with the ability to accept cash or Ebix stock.

The offer also establishes a guaranteed floor price of $0.725 for a common stock owner and a guaranteed floor price of $0.825 for a preferred share owner for a period of one year from the Ebix-Healthaxis merger, according to the letter.

As previously reported, Healthaxis agreed to become the health care division of BPO through a reverse merger between the two companies.

Each share of BPO common stock will be exchanged for 0.3393 shares of Healthaxis common stock.

Shares of BPO preferred stock and other BPO securities will be exchanged for a mix of shares of Healthaxis common stock, preferreds and other securities based on various fixed exchange ratios, a prior BPO news release said.

Healthaxis said it will effect a reverse stock split in connection with the transaction's closing, which is expected during the fourth quarter of 2008.

Atlanta-based Ebix provides software for the insurance industry.

Healthaxis is a provider of health-care payer solutions located in Irving, Texas.

Based in Anaheim, Calif., BPO is a provider of business process outsourcing services focused on on-demand human resources, information technology, enterprise content management and finance support.

Mentioned in this article:

BPO Management Services Inc. OTCBB: BPOM

Ebix, Inc. Nasdaq: EBIX

Healthaxis, Inc. Nasdaq: HAXS

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