Iona plans share offering worth $100m

Iona Technologies will issue shares worth about $100 million (€113 million), it said yesterday, fuelling market speculation that the Irish-based software firm will announce a significant acquisition shortly.

The company, which also reported a return to profit for the fourth quarter of 2001, said it would issue five million shares to fund "general corporate purposes, including working capital".

Three founders of Iona - Dr Chris Horn, Mr Annrai O'Toole and Mr Sean Baker - and Iona's chief executive, Mr Barry Morris, will also sell 500,000 shares in the offering. This will net these individuals about $10 million at the firm's current share price of $22.

Mr Morris said Iona was offering the shares to capitalise the company appropriately for opportunities in the market. He would not comment directly on whether the firm was in merger negotiations with any specific firm. However, he said mergers and acquisitions were a big part of how Iona operated.

The type of acquisitions Iona would be interested in pursuing would accelerate the company's strategy rather than transform it, said Mr Morris.

Dublin analysts speculated that a potential Iona acquisition could be in the software security sector or the distribution business. Mr Barry Dixon, technology analyst with Davy Stockbrokers, said Iona could afford to do a big deal as it already had $50 million on its balance sheet and may fund a deal with stock and cash. "It could be quite significant," he said. "It may be buying a distribution business that is cash hungry and would help Iona sell its software." Last year, Iona announced the biggest acquisition in its history when it bought Netfish for $270 million in an all stock deal.

Mr John Coolican, analyst with Merrion Stockbrokers, said Iona might seek to expand its Web services by adding more security. He speculated that the company might acquire a private US technology firm. Shares in Iona, which develops software that enables companies to integrate computer systems, fell 12 per cent on news.

The share issue, which amounts to a dilution of 18 per cent, is being underwritten by Lehman Brothers, SG Cowen Securities Corp, Prudential Securities and Goodbody Stockbrokers. The underwriters will be granted an option to purchase 825,000 additional shares to cover over-allotments.

Iona also announced its fourth quarter results yesterday which showed it recorded sales of $45.5 million revenue, up 11 per cent on the loss-making third quarter and slightly ahead of consensus estimates but below the year-ago period. But, this was still more than $2 million below its $47.8 revenue figure for the same quarter 2000.

For 2001, Iona reported revenues of $180.7 million, an 18 per cent increase over 2000.

The firm returned to profit reporting pro forma earnings of $300,000, or one US cent per share, compared to a pro forma net loss of $2.2 million, or eight cents per share, in the third quarter.

In the fourth quarter 2000 Iona reported basic pro forma earnings of $0.39.