JSE-listed Huge Group’s bid to takeover Adapt IT has suffered a dent after Canadian software group Volaris yesterday made a cash offer to acquire the specialised software services provider.
In January, technology company Huge Group launched a multimillion-rand surprise bid to acquire all of the issued shares of JSE-listed Adapt IT, offering a 33% premium on the shares.
James Herbst, CEO of Huge, said the group was offering to purchase from each Adapt IT shareholder all, or any, of their shares at R5.52.
In its latest financial results, Adapt IT CEO Sbu Shabalala said the company reduced its net debt by R140 million in the six months to December to R324 million, down from R464 million compared to last year, despite COVID-19 disrupting its operations.
Huge Group, whose subsidiaries operate in the telecommunications, media, technology and software industries, said the offer was conditional “as to acceptances on the basis that the minimum percentage of Adapt IT shares required to be tendered by shareholders before Huge is required to accept all tendered Adapt IT shares is 0.01% of the Adapt IT shares”.
Now, in a turn of events, Adapt IT has received a notice of firm intention to make an offer to acquire more than 50% of the issued ordinary shares of Adapt IT for a cash consideration of 650c per share from the Canadian firm.
In a statement, Adapt IT says the cash consideration represents a premium of 56.9% to the 30-day volume weighted average traded price of Adapt IT shares on the JSE of 414c, as at 26 January 2021, being the last trading date prior to the date on which the general offer by Huge Group to Adapt IT shareholders was announced.
Scheme implementation
Volaris is a subsidiary of Toronto-listed Constellation Software.
The offer will be made by way of a scheme of arrangement to be proposed by Adapt IT to its shareholders.
According to the specialised software services provider, if the scheme is not proposed or fails, Volaris will make a general offer to the Adapt IT shareholders to acquire at least 50% of Adapt IT shares.
It adds that if the scheme is implemented, Adapt IT shareholders will be entitled to elect to retain all or part of their Adapt IT shares and remain invested in Adapt IT as a delisted company.
Irrevocable undertakings have been given to Volaris to vote in favour of the scheme and the delisting resolution by shareholders holding 21.6% of Adapt IT shares excluding treasury shares, Adapt IT notes, adding that Volaris has provided a bank guarantee for the maximum possible purchase consideration to the takeover regulation panel.
The company points out the Volaris offer is an alternative to, and materially in excess of, the unsolicited all-share offer that Adapt IT received on 27 January 2021 from Huge Group to acquire up to all of the issued shares of Adapt IT.
Huge Group made an offer to Adapt IT shareholders in the ratio of 0.9 Huge Group shares for every Adapt IT ordinary share.
That swap ratio is based on a reference price of 613c per Huge Group share and implied an offer price of 552c per Adapt IT share, but the subsequent reduction in the trading price of Huge Group shares would imply an even lower offer price per Adapt IT share.
In the event that the Volaris offer becomes operative, the listing of the Adapt IT shares on the JSE will, subject to compliance with the listings requirements of the JSE, be terminated if the delisting is approved by Adapt IT shareholders.
“The Volaris offer is subject to all the applicable regulatory approvals, including the conditions set out in the SENS announcement outlining the details of the offer. The Volaris offer is also subject to Volaris acquiring more than 50% of the Adapt IT shares,” says the firm.
Supporting future growth
Founded in Toronto, Canada, in 1995, Constellation Software, the parent company of Volaris, is an international provider of vertical market software and services to a number of industries, both in the public and private sectors.
Its mission is to acquire, manage and build software businesses that develop specialised software solutions.
Constellation Software has a customer base of over 125 000 customers operating in over 100 countries around the world, with over 27 000 employees generating revenue exceeding $3.8 billion.
“The successful conclusion of the Volaris offer would result in a well-governed and diversified South African technology company being backed by a well-capitalised leading global technology firm keen to support further growth,” reads the Volaris offer letter.
“Adapt IT would come to represent Volaris’s interests on the African continent, a region in which Volaris currently has limited presence but intends to grow in the coming years. The Volaris offer would result in much-needed direct foreign investment in South Africa, additional growth capital being invested into the country and skills transfer, all to the benefit of Volaris, Adapt IT, South Africa and stakeholders in general.”
Following the offer from Huge Group, Adapt IT says it constituted an independent board to evaluate the Huge Group offer, and any subsequent offers received by the shareholders of Adapt IT, with the assistance of independent advisors.
It notes the independent board is therefore evaluating the Volaris offer.
Adapt IT independent non-executive chairman Craig Chambers comments: “The independent board of Adapt IT has taken note of Volaris’s firm intention to make an offer. Further details of the offer from Volaris will be included in a circular to shareholders, which will contain terms of the scheme of arrangement and general offer, together with the independent board’s opinion and recommendation.”
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