- Adapt IT's independent board, made up of its non-executive directors, has agreed with an expert that a takeover offer from Huge Group is too low.
- The board also has concerns about Huge's BEE status and synergies between the two companies.
- Adapt IT's CEO has taken leave following an accusation from his estranged wife that he orchestrated a violent attack on her partner.
An independent review into the terms of Huge Group’s hostile bid for software group Adapt IT found that the terms of the offer are "unfair and unreasonable" to Adapt IT shareholders.
The Adapt IT independent board, made up of its non-executive directors, commissioned an independent expert to assess the bid. It has agreed with the review and urged shareholders not to pursue the Huge offer.
Adapt IT is currently facing a tumultuous time as its CEO Sbu Shabalala is on leave following an accusation from his estranged wife that he orchestrated a violent attack on her partner.
Shabalala, who founded Adapt IT, has been granted a leave of absence for three months "to attend to personal matters". He said that the allegations against him were "without merit".
Apart from the takeover offer from Huge, Adapt IT also received an acquisition bid from Canadian software firm Volaris Group.
The takeover by the Canadian company has been supported by shareholders holding 44% of Adapt IT shares, but last week the companies said that the deadline for the fulfilment of the deal has been extended by another week.
Volaris has not yet responded to Fin24's request for comment on whether its offer remains in place.
It is offering R6.50 a share in cash, while as part of Huge’s initial offer, Adapt IT shareholders would get 0.9 Huge Group share for every one Adapt IT share they held. At the time of the offer, that worked out to R5.52 per share.
But according to the independent expert view, a fair price range for Adapt IT is R7.00 to R9.09 a share, the independent board said. Its shares are currently trading at R6.35.
Apart from the fact that Adapt IT shareholders can get a better deal by selling their shares, or accepting the Volaris offer, the independent board argued that Adapt IT shares were more liquid than Huge shares.
"The result is that Adapt IT shareholders who accept the Huge offer will receive Huge shares which are not as easily tradeable as Adapt IT Shares," the board said.
It also doesn’t see any "valuable synergies" in combining the two companies.
Huge mainly focuses on telecommunication, while Adapt IT is a software company.
Lastly, Huge’s BEE Status is "non-compliant", while Adapt IT is black owned.
"(There) is a concern that the BEE status of Adapt IT Proprietary Limited would drop from Level 1 to Level 6, undoing a decade of transformation and posing a substantial risk to Adapt IT, including putting Adapt IT in breach of several major customer contracts which have contractual undertakings regarding the maintenance of Adapt IT’s BEE Scorecard level," the board said.