As the clocks runs out on a six-month takeover campaign of Adapt IT, Huge Group shareholders have cemented the fact that the holding company wants a piece of the listed technology group in its portfolio.
Huge Group shareholders on Tuesday backed the management’s bid to take over Adapt IT, a company founded by Sbu Shabalala that provides and services software.
Huge, which is valued at about R1bn, is a holding company with businesses specialising in areas such as payments, telecommunications, software and media.
Huge first made its move for Adapt IT at the beginning of 2021, in a share-swap deal valuing the company at R800m, or R5.52 a share. Volaris, a unit of Canada’s Constellation Software, then made a firm cash offer of R1bn, which has the support of Adapt IT management. If successful, the Volaris deal would result in Adapt IT delisting from the JSE.
A bidding war has ensued, with Volaris increasing its offer by 7.7%. That pales in comparison with Huge’s 68% premium, which values Adapt IT at R9.09 a share.
James Herbst, CEO of Huge Group, told Business Day he is pleased with how Tuesday’s shareholders meeting went.
“I was chuffed with the attendance. [A total] 90% of our shareholders were represented at the meeting, and 99% voted in favour of the resolutions. It certainly speaks to the level of engagement we have with our shareholders.”
Even though it is almost certain that Huge cannot take over Adapt IT completely, shareholders chose to support the management’s continued bid, indicating that the group is comfortable walking away with just a piece of the business, which may not be the case for Volaris.
Based on the number of Adapt IT shareholders who participated in its latest vote and those who have stated their commitment to the Volaris offer, Herbst estimates that the Canadian firm may end up with “33% of Adapt IT’s shares, Huge will hold 29%, and shareholders holding the balance of 38% will retain their shares”.
Such a scenario would test Volaris’s determination to create a pan-African IT group because it has previously said it would walk away from the deal if it does not hold a controlling stake in Adapt IT.
Huge shareholders also supported a resolution to issue new shares as part of the takeover offer, and granted management approval to buy back some of its shares. All resolutions received just over 99% approval.
Those Adapt IT shareholders who are still on the fence about the two offers now have to decide if they want to get cash from Volaris, or to remain invested but in a private company, or to swap out their shares for Huge Group stock. They have until July 30 to make the choice.
Huge has framed its offer as an opportunity to create a bigger IT company to compete in a market dominated by Telkom’s BCX, Dimension Data and EOH, while giving shareholders a chance to participate in the potential upside in the share price.
Volaris has pitched an easy cash payout for investors in Adapt IT, while also bringing a deep-pocketed parent to drive growth elsewhere on the continent. Adapt IT’s international business accounts for about 27% of its revenues.
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