Lufthansa countersues Datalex for €9.7m as fundraise concludes

Development came as Datalex held meeting to rubber-stamp €25m equity raise

Datalex chief executive Sean Corkery at the company’s agm in 2019. Photograph: Tom Honan

Datalex chief executive Sean Corkery at the company’s agm in 2019. Photograph: Tom Honan

 

A former key Datalex customer, Lufthansa, has countersued the Irish travel retail software company for at least €9.7 million as part of an ongoing dispute over a massive contract that the German airline pulled almost two years ago.

The development was revealed by Datalex just before the company held an extraordinary general meeting (egm) on Thursday morning to rubber-stamp the terms of a €25 million share sale to shore up the company’s finances.

“In the context of today’s egm, the timing of the claims, Datalex considers, appears to have been designed to attract publicity and cause disruption to the group’s capital raising,” Datalex said.“Datalex rejects the allegation that it breached its obligations under the Lufthansa agreement, disputes the legality of the termination notice and will fully pursue the outstanding amounts it believes that the group is entitled to recover from Lufthansa under the Lufthansa agreement.”

Lufthansa decided in September 2019 to terminate a multimillion-euro contract for Datalex to overhaul its digital commerce offering, after the project, originally agreed in 2016, had gone over budget and missed key deadlines.

Separately, Datalex’s irregular accounting of revenues from the contract had triggered a financial scandal the previous January, precipitating an overhaul of the company’s board and management, cost-cutting and the need for emergency loans from its main shareholder, Dermot Desmond, to keep the business afloat.

Datalex commenced legal proceedings against Lufthansa in a Frankfurt court shortly after the contract was pulled. Its annual report for 2020 showed that it had invoiced balances due by the German carrier and its Swiss International Airlines unit of $2.9 million (€2.5 million). Datalex had also notified Lufthansa of its intention to claim more money by way of damages.

Alleges breach

“In its counter-claim, Lufthansa alleges breach of the Lufthansa agreement and claims damages, return of remuneration paid to Datalex under the Lufthansa agreement and expenses,” the company said. In addition to the €9.7 million claim, Lufthansa is seeking a court judgment for further potential damages.

The virtual egm saw shareholders approve the terms of a €25 million equity raise. The money is earmarked to repay Mr Desmond’s loans, plus interest, totalling €16 million, and leave the company with working capital to take advantage of opportunities as the airline industry rebounds from Covid-19.

However, shares in Datalex slid as much as 10 per cent in Dublin on Thursday as investors weighed the impact of the Lufthansa countersuit.

The three-pronged cash call initially involved Mr Desmond’s IIU vehicle and another shareholder, Pageant Holdings and its founder, Nick Furlong, agreeing four weeks’ ago to buy €14.7 million of new shares in a so-called cornerstone placing .

Mr Desmond, who owned 29.8 per cent of Datalex prior to the deal, 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. However, the Irish Takeover Panel granted Mr Desmond a waiver, subject to shareholder approval. Investors rubber-stamped this at the egm.

Datalex’s corporate broker, Goodbody stockbrokers found buyers for €4.2 million of shares in the stock market on June 4th.

The third element, a €6.1 million “open offer” share sale to existing investors, including Mr Desmond and Mr Furlong, secured 84 per cent take-up by the deadline this week. The remaining 16 per cent will be sold to a group of institutional stock-market investors that were lined up as back-up buyers by Goodbody last month.

Revenues slid

Datalex’s revenues slid by 38 per cent to $28.1 million last year, as its airline customers suffered their worst year on record due to Covid-19. Airlines use Datalex software to manage air-fare sales and pricing, clock up seat and baggage fees, and make car, hotel and insurance bookings.

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.