ID Data acquired credEcard for £250,000 in shares in May last year. Under the terms of the deal ID Data will receive an estimated payment of £1.4 million in cash and Contis shares - around five per cent of the new company's stock - for the unit and will be repaid £800,000 it has ploughed into credEcard so far in development funding.

The credEcard business made a pre-tax loss of approximately £1.1 million on turnover of £200,000 since being acquired and is also expected to report a loss for the year ending 31 March 2009.

Cox is establishing Contis specifically to buy credEcard and is set to invest £250,000 in the new firm. Cox will hold a 41% stake in the new venture, with a group of investors expected to put in £3.75 million for a 54% stake.

Cox will remain in his position at ID Data and continue to be a major shareholder - he currently holds 10% of the firm's ordinary shares - until a replacement is found.

ID Data says it will use the cash proceeds of the deal for working capital requirements.

"This proposed transaction represents a significant profit for ID Data on its investment in credEcard made last year," says ID Data chairman Mike Blackburn "It will provide the funds to help stabilise ID Data, facilitate its growth and remove the development costs of credEcard from our current, and future, year's expenditure."

The offer is subject to ID Data shareholder approval and the new Contis Group completing its funding arrangements. ID Data says irrevocable undertakings to approve the transaction have already been received from shareholders representing 53% of its company stock.

However, in a statement ID says although its independent directors - excluding Cox - say the offer is "fair and reasonable", a nominated advisor has not been able to reach a conclusion which would support the transaction due to the apparent valuation of credEcard post new funding being higher than the value of the offer.

ID Data's shares were up 0.01 pence, or 1.5%, to 0.68 pence in mid morning trading.