Huge Group launches Adapt IT shock takeover bid

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James Herbst, CEO of Huge Group.
James Herbst, CEO of Huge Group.

Technology company Huge Group has launched a multimillion-rand surprise bid to acquire all of the issued shares of JSE-listed Adapt IT, offering 33% premium on the shares.

In a note to shareholders yesterday, the JSE-listed group said it’s offering to purchase from each Adapt IT shareholder all, or any, of their shares at R5.52.

Huge Group, whose subsidiaries operate in the telecommunications, media, technology and software industries, said the offer is 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”.

It added: “Huge shall discharge its obligations in relation to the sale consideration by issuing to each shareholder that accepts the offer authorised ordinary shares of Huge at a swap ratio of 0.9 for each Adapt IT share tendered. For avoidance of doubt, each seller will receive 0.9 shares in consideration for each sale share, rounded up to the nearest whole number of consideration shares. The swap ratio is based on a reference price of 613c per Huge share.”

The takeover bid by Huge, which is led by James Herbst as CEO, comes on the back of a recent announcement that the company plans to list on the London Stock Exchange (LSE).

On Monday, Huge announced it had decided to apply for admission of its shares on the LSE’s Alternative Investment Market as a secondary listing. Huge, however, said it would retain its primary listing on the JSE, as well as the A2X Stock Exchange.

Adapt IT, the JSE-listed software services firm, has shown resilience in a period where most businesses have been affected by the COVID-19 pandemic.

Adapt IT confirmed the bid, telling shareholders in a note published on the Stock Exchange News Service: “As the offer is conditional on the approval by Huge shareholders, Adapt IT will keep shareholders informed and up to date on this process.

“The offer is conditional on Huge receiving shareholder approval from Huge shareholders in terms of section 9.20 of the JSE listings requirements and the takeover regulations panel having issued a compliance certificate in relation to the offer.”

The Johannesburg-headquartered Adapt IT provides specialised software and digitally-led business solutions to the education, manufacturing, financial services, energy, communications and hospitality sectors, and has a presence in Mauritius, Botswana, Ireland, Kenya, Australia and New Zealand.

The company derives almost three-quarters of its revenue from SA.

In its most recent financial results, Adapt IT reduced its net gearing to 43% from 66%, and all debt covenants were met by 30 June 2020, which is when the company’s financial year ended.

Dividends were withheld for the reporting period, with Adapt IT saying its board had prioritised the reduction of borrowing and has “remained prudent in preserving cash during these unprecedented times”.

In the 2020 financial year, cash generated from operations improved by 27% to R227 million, revenue increased by 3% to R1.5 billion, and earnings per share were up 13% to 57c. Headline earnings per share were also up 29% to 73c.

The group’s earnings before interest, tax, depreciation and amortisation improved by 9% to R250 million, compared to R230 million in 2019.

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