June 19 (Reuters) - Ebix Inc said that it and an affiliate of Goldman Sachs Group Inc decided to cancel their planned merger after U.S regulators started an investigation into allegations of misconduct at Ebix, an insurance software provider.
Atlanta-based Ebix said it was notified of the investigation in a letter that it received on June 14 from the U.S. Attorney for the Northern District of Georgia.
Shares of Ebix tumbled 25 percent in after-hours trade, after closing at $19.72 on the Nasdaq on Wednesday.
"We believe that the allegations in the class action lawsuits, which we have understood to form the basis of these investigations are without any merit," Pavan Bhalla, chairman of Ebix's Special Committee of the Board of Directors, said in a statement.
Ebix has been dogged by allegations from short-sellers about inaccuracies in its financial statements. An affiliate in Goldman's merchant bank had come to Ebix's aid by agreeing to buy the company for $743 million last month.
Goldman Sachs was not immediately available for comment outside regular business hours.
The merger agreement is being cancelled without payment of a termination fee by either party, Ebix said.
Ebix said it intends to continue evaluating its strategic options.