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Category 1 Disposal Announcement and Withdrawal of Cautionary Announcement
ADCORP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1974/001804/06
Share code: ADR & ISIN: ZAE000000139
("Adcorp" or "the Group")
CATEGORY 1 DISPOSAL ANNOUNCEMENT AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are advised that on 30 November 2020 (“Signature Date”), Adcorp, through
its wholly-owned subsidiary Adcorp Workforce Solutions Proprietary Limited (“AWS”),
entered into an agreement (“Agreement”) with Corvest 12 Proprietary Limited
(“Corvest”), ASS Investco Proprietary Limited (“Investco”), K2020796180 (South Africa)
Proprietary Limited, K2020796194 (South Africa) Proprietary Limited, K2020796213
(South Africa) Proprietary Limited (collectively, the “New Holdco Shareholders”),
K2020791073 (South Africa) Proprietary Limited (“New Holdco”), K2020791335 (South
Africa) Proprietary Limited (“New Opco”), Agile Capital Four Proprietary Limited (“Agile”)
(acting through Investco), Adcorp Support Services Proprietary Limited (“ASS”) and key
management of ASS being, Trevor Fowler, Warrick Henderson and Ben Carel Van Der
Merwe. In terms of the Agreement, AWS will sell 100% of the issued shares in ASS to
New Holdco which will be owned by the New Holdco Shareholders on the Effective Date
(as defined in paragraph 7), for the disposal consideration set out in paragraph 4
(“Disposal Consideration”) (“Disposal”).
2. DESCRIPTION OF ASS
ASS comprises of two divisions, namely:
• FMS Marketing Solutions Division (“FMS Division”) is a leading provider of body
repatriation and funerary support related value-added services including
emergency medical services, legal, trauma, assault and HIV support.
• The Employee Benefits Division (“EB Division”) offers employee benefits,
insurance products and services, inclusive of core insurance benefits, income
protector, lifestyle benefits and employee benefits equalisation (provident fund and
medical).
3. RATIONALE FOR THE DISPOSAL
Adcorp has developed a clearly articulated corporate strategy which, amongst others,
sets out the strategic portfolio intent. The ASS business does not meet the growth and
portfolio criteria as encapsulated by our Vision 2025; to become a leading workplace
solutions company in select geographies. It is therefore deemed to be non-core. The
proceeds from the sale will further bolster the already improved liquidity of the Group,
thereby improving the gearing to targeted levels.
4. DISPOSAL CONSIDERATION
The Disposal Consideration will not exceed R227.3 million and is payable as follows:
- with effect from the Effective Date (as defined in paragraph 7), payment of R181.1
million, less the cost of the indemnities and warranty insurance as set out in
paragraph 9, at which point ownership of all risks and benefits attached to the
shares in ASS, will pass to New Holdco;
- to the extent that ASS achieves its EBITDA forecast for the period commencing
on 1 March 2020 and ending on 28 February 2021, a payment capped at R34.2
million; and
- to the extent applicable, an amount equal to R12 million subject to ASS
maintaining a certain minimum number of policy holders or a minimum revenue of
R23.3 million for the period from 1 January 2021 until 31 December 2021.
5. APPLICATION OF THE DISPOSAL CONSIDERATION
The proceeds of the Disposal will be used to reduce debt facilities and strengthen the
already improved liquidity of the Group.
6. CONDITIONS PRECEDENT
The Disposal is subject to the fulfilment or waiver of the following outstanding conditions
precedent (“Conditions Precedent”):
- by no later than 31 January 2021, or such date as may be agreed in writing by the
parties:
• the signature of a transitional services agreement relating to the migration of
ASS’s information technology infrastructure to New Opco which is a wholly owned
subsidiary of New Holdco;
• the signature of an intellectual property assignment agreement relating to the
assignment of intellectual property to ASS;
• the signature of an exclusive services agreement in terms of which, Adcorp shall
grant the EB Division exclusivity to continue providing employee benefits and other
financial services to its permanent and temporary employees for a period of 5 (five)
years; and
• the signature of an escrow agreement in terms of which a portion of the Disposal
Consideration which may be in dispute in relation to a warranty and indemnity
claim shall be held by an escrow agent.
- by no later than 28 February 2021, or such date as may be agreed in writing by the
parties:
• Adcorp obtaining approval from its shareholders for the Disposal;
• the Disposal being unconditionally approved by the Competition Authorities in
terms of the Competition Act, or conditionally approved on terms acceptable to the
relevant party affected by such condition;
• the written bridge loan facility agreement between New Holdco and First National
Bank, a division of FirstRand Bank Limited, is concluded and becomes
unconditional in accordance with its terms;
• Corvest, Investco, Agile, New Opco and New Holdco take out the indemnity and
warranty insurance set out in paragraph 9; and
• other conditions precedent that are customary for a transaction of this nature.
7. EFFECTIVE DATE OF THE DISPOSAL
The Effective Date of the Disposal is five business days after the date on which the last
of the Conditions Precedent has been fulfilled or waived (to the extent legally permissible),
as the case may be, which date may not be after 28 February 2021 (or such later date as
may be agreed in writing) (“Effective Date”).
8. FINANCIAL INFORMATION
The value of the net assets of ASS as at 31 August 2020, being the date of the last
unaudited interim financial statements, was R181.1 million (including intra-group loan
receivables and payables).
The unaudited profits after tax attributable to ASS for the interim period ended 31 August
2020, was R14.4 million (including intra-group charges). The interim financial statements
have been prepared in terms of IFRS and are the responsibility of the Adcorp board.
These financial statements have not been audited or reviewed by the Group’s auditors.
9. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT
The Agreement contains indemnities and warranties given by Adcorp and AWS in favour
of Corvest, Investco, Agile, New Opco and New Holdco, which are standard for a
transaction of this nature, for which the aforementioned parties will take out partial
insurance cover at a cost of approximately R2.7 million, the cost of which will be paid by
Adcorp.
10. CLASSIFICATION OF THE DISPOSAL
As the value of the Disposal exceeds 30% of Adcorp’s market capitalisation as at the
Signature Date, it meets the definition of a Category 1 transaction as contemplated in
section 9 of the JSE Limited Listings Requirements.
As a result, the Disposal is required to be approved by an ordinary resolution of Adcorp’s
shareholders and accordingly a special general meeting of shareholders will be
convened.
11. CIRCULAR
A circular containing the full details of the Disposal, incorporating a notice convening the
required general meeting of the shareholders of Adcorp, will be distributed to
shareholders in due course, at which time the salient dates and times of the Disposal,
including the date of the general meeting, will be announced on SENS.
12. WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the Group’s cautionary announcement released on SENS
on 1 July 2020 and the further cautionary announcements released on SENS on 13
August 2020, 22 September 2020, and 4 November 2020.
Shareholders are hereby advised that as the particulars of the Disposal have now been
announced, caution is no longer required to be exercised by shareholders when dealing
in Adcorp’s securities.
1 December 2020
Sponsor and Transaction Adviser
PSG Capital
Date: 01-12-2020 03:47:00
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