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Acquisition of CQS Investments
ADAPT IT HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/017276/06)
Share code: ADI ISIN: ZAE000113163
(“Adapt IT” or “the Company”)
ACQUISITION OF CQS INVESTMENTS
1. INTRODUCTION
The board of directors of Adapt IT (“the Board”) is pleased to inform shareholders that Adapt IT’s wholly-
owned subsidiary, Adapt IT Proprietary Limited (“the Purchaser”), has entered into a Share Purchase
Agreement (“Agreement”) dated 16 October 2015 (“Signature Date”) with Ethos Nominees Proprietary
Limited as agent of certain special purpose investment vehicles affiliated with it, (collectively referred to as
“Ethos”), Tascali Investments 5 Proprietary Limited (“Tascali”), a wholly-owned subsidiary of Kapela
Investments, a majority black owned investment company, A. Cohen (“Cohen”), The Trustees of La Luna
Trust (“La Luna Trust”) and R. Hampton (“Hampton”) (collectively referred to hereinafter as “the Sellers”)
in terms of which the Purchaser will acquire the “Sold Equity”, as detailed hereafter, from the Sellers as
one indivisible transaction in accordance with the terms of the Agreement, for a total purchase price of
R216 815 000 (“the Acquisition”).
The “Sold Equity” comprises the Sold Shares and the Sold Claims.
The “Sold Shares” comprise 100% of the issued and outstanding shares and share capital in CQS
Investment Holdings Proprietary Limited (“CQS Investments”).
The “Sold Claims” comprise all of the claims on loan account or otherwise of Ethos, Tascali, Cohen, La
Luna Trust and Hampton, and any person related or inter-related to any of them against CQS Investments
and its subsidiaries (“CQS Investments Group”).
2. THE ACQUISITION
2.1 Nature of the CQS Investments business
With over 20 years in business and approximately 4 000 clients, CQS Investments is a value added
distributor of a combination of its own- and third party- (being CaseWare, ACL and Confirmations.com)
Intellectual Property software solutions for audit, data analytics, controls monitoring, risk management
and financial reporting to financial professionals, corporates and the public sector. CQS Investments,
which has the reputation of being a leader in this niche market, also services clients in Nigeria, Kenya,
Zambia, Tanzania, Botswana and Zimbabwe through a direct and a distributor network.
2.2 The rationale for the Acquisition
The Acquisition, which is in line with Adapt IT's strategy of targeted acquisitive growth, will augment
the Company’s Financial Services and public sector markets’ representation by providing
diversification into the auditing and accounting professions and will enhance its technology
diversification.
2.3 Purchase price
The total amount payable by the Purchaser to the Sellers, whether in cash or by way of the allotment
and issue of ordinary shares in the authorised but unissued share capital of Adapt IT (“Consideration
Shares”) as consideration for the Sold Equity, is R216 815 000 million (“Purchase Price”), and will
be:
2.3.1 discharged to and between the Sellers as follows:
2.3.1.1 R159 879 215 in cash; and
2.3.1.2 R56 935 785 in Consideration Shares,
in full on the fifth business day immediately after the date of which the last of the conditions
set out in paragraph 2.4 below is fulfilled or waived, as the case may be (“Closing Date”).
2.3.2 For a period of 12 months from the Closing Date (“Lock-Up Period”), the Consideration
Shares which are payable to Tascali, Cohen, La Luna Trust and Hampton (the minimum value
of which is a fixed amount of R45 158 359 (“Consideration Shares Minimum Value”)) will
be subject to certain “Lock-Up Restrictions” in terms of which such shares may not, inter alia,
be disposed of. In the event that on the expiry date of the Lock-Up Period the 30-day weighted
average traded price of Adapt IT ordinary shares, multiplied by the total number of
Consideration Shares allotted and issued to the relevant Sellers on the Closing Date (“WATP
Value”) is less than the Consideration Shares Minimum Value, then the Purchaser will pay
Tascali, Cohen, La Luna Trust and Hampton the shortfall between the WATP Value and the
Consideration Shares Minimum Value in cash, subject to a maximum aggregate cash amount
of R20 000 000.
2.3.3 Any outstanding payments in respect of the Purchase Price as at 30 November 2015 will
accrue interest of 7% per annum from 1 December 2015 until the date of payment in full.
2.4 Conditions to Closing and effective date
Closing is subject to the fulfilment (or, to the extent permissible, the waiver) of the following
suspensive conditions on or before 30 January 2016, or such other date that the Sellers and the
Purchaser may agree to in writing:
2.4.1 the approval of the Acquisition by the South African competition authorities;
2.4.2 approval of the change in control that will occur as a result of the Acquisition being obtained
from:
2.4.2.1 third party loan providers to certain entities within the CQS Investments Group; and
2.4.2.2 the key software principals, including Capital Confirmation International LLC,
Caseware International Inc and ACL Europe Limited;
2.4.3 no written notice being delivered by the Purchaser to the Sellers in which the Purchaser
elects not to complete the Acquisition in accordance with the terms of the Agreement in the
event that the Sellers make further disclosures against the representations and warranties
on the part of the Sellers contained in the Agreement; and
2.4.4 no material adverse change, as set out in the Agreement, having occurred in respect of the
CQS Investments Group prior to midnight on the date on which the aforementioned
conditions have been fulfilled (or waived, as the case may be).
Upon Closing, the Acquisition will take retrospective effect from 1 July 2015 (“the Effective Date”).
2.5 Memoranda of Incorporation
Subsequent to the Acquisition, the Memoranda of Incorporation of CQS Investments and its
subsidiaries will be reviewed to ensure that they do not prevent Adapt IT from complying with its
obligations in terms of the Listings Requirements of JSE Limited.
3. THE VALUE OF, AND PROFITS ATTRIBUTABLE TO, CQS INVESTMENTS
The value of the net assets that are the subject of the Acquisition as at 28 February 2015 was R67 653 792.
The EBITDA attributable to the net assets that are the subject of the Acquisition for the year ended
28 February 2015 was R35 736 387 and the profit after interest and tax was R10 678 432.
4. CLASSIFICATION OF THE ACQUISITION
The Acquisition is classified as a Category 2 transaction in terms of the Listings Requirements of JSE
Limited.
19 October 2015
Sponsor
Merchantec Capital
Purchaser’s Attorneys
Norton Rose Fulbright South Africa Incorporated
Garlicke and Bousfield Incorporated
Corporate and Legal Advisors to the Sellers
Java Capital
Legal Advisors to Ethos
Bowman Gilfillan Inc.
Date: 19/10/2015 12:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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