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Acquisition of CDR Live and its Subsidiaries and Withdrawal of Cautionary Announcement
Adapt IT Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1998/017276/06)
Share Code: ADI
ISIN: ZAE000113163
(“Adapt IT Holdings”)
ACQUISITION OF CDR LIVE AND ITS SUBSIDIARIES AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. Introduction
Pursuant to the cautionary announcement released on the Stock Exchange News
Services of the JSE Limited (“JSE”) on 18 October 2017 (“Cautionary
Announcement”), the board of directors of Adapt IT Holdings (“the Board”) is pleased
to announce that Adapt IT Holdings and its corresponding wholly-owned subsidiaries
have entered into four transaction agreements (collectively referred to hereinafter as
“the Agreement”) which govern an indivisible transaction to acquire the business of
CDR Live Limited (“CDR Live”), the issued share capital of and shareholder claims in
its wholly-owned subsidiary, LGR Analytics, and the businesses of its wholly-owned
subsidiaries, LGR South Africa and LGR Australia (collectively referred to hereinafter as
the “LGR Group”) from CDR Live (in respect of CDR Live and LGR Analytics), LGR
Telecommunications Proprietary Limited - South Africa (in respect of LGR South Africa)
and LGR Telecommunications Proprietary Limited - Australia (in respect of LGR
Australia) (“the Acquisition”). The LGR Group trades under the LGR brand name.
In terms of the Agreement, Adapt IT Holdings and its corresponding subsidiaries will
acquire:
1.1. the businesses of CDR Live, LGR South Africa and LGR Australia, which
businesses are each carried on as a going concern, and all activities related
thereto, including:
1.1.1. certain assets and debtors;
1.1.2. customer contracts;
1.1.3. intellectual property; and
1.1.4. the related liabilities;
and
1.2. the issued share capital of and shareholder claims in LGR Analytics, a USA
resident company.
2. Nature of the LGR business
2.1. The LGR Group, through its operating subsidiaries, LGR Telecommunications, is
a specialist solutions provider with an exclusive focus on the global
Telecommunications industry. With a track record spanning over 18 years, the
LGR Group has built a reputation for the provision and management of end-to-
end data warehouse and business intelligence systems at leading international
operators.
2.2. The LGR Group comprises businesses in Mauritius, South Africa, Australia and
USA. The South African and Australian businesses constitute the main operating
units and the Mauritian business owns the intellectual property. The USA
operations provide support for the South African business.
3. Purchase Consideration
The total Purchase Consideration comprises:
3.1. A cash amount of R42 800 000 which amount shall be paid to the LGR group on
the Closing Date, as detailed in paragraph 7 below;
3.2. A contingent earn-out amount, which shall be determined based on the
performance of the business for the financial year commencing 1 July 2017 and
ending 30 June 2018 (“Earn Out Period”), limited to a maximum purchase
consideration of R31 200 000 (“Earn Out Value”), which shall be settled via the
issue of shares in Adapt IT Holdings within 3 (three) months after the expiry of the
Earn Out Period. The Agreement allows for a final calculation and adjustment, if
applicable, of the Earn Out Value 6 (six) months and again 12 (twelve) months
after the expiry of the Earn Out Period; and
3.3. In relation to LGR Analytics, the purchase consideration is to be determined based
on the earnings before interest, tax, depreciation and amortisation (“EBITDA”),
achieved by LGR Analytics for the 2 (two) years after the award of a specified
contract to LGR Analytics by no later than 30 June 2018, limited to a maximum
purchase consideration of USD1 000 000, failing which, the purchase
consideration shall be USD1.00 (One United States Dollar).
4. Transaction Rationale
4.1. CDR Live is a software based business that owns its own intellectual property and
has annuity based revenue streams;
4.2. CDR Live’s intellectual property and customer base, together with their experience
working with large global telecommunications networks creates a more diversified
customer base and provides bidirectional cross selling opportunities for Adapt IT,
opening up foreign markets for Adapt IT’s other software products and services
globally;
4.3. Acquiring CDR Live provides revenue and geographic diversification for Adapt IT.
All revenue is hard currency denominated from customers outside of South Africa,
which creates improved revenue diversification for Adapt IT shareholders. CDR
Live operates in the telecommunications sector in many African countries and
Australia; and
4.4. The Acquisition will provide complementary intellectual property to Adapt IT’s
Telecommunications Service Provider Solutions business unit.
5. Conditions Precedent
The Acquisition is subject to the following conditions precedent, all of which are expected
to be fulfilled by no later than 31 January 2018:
5.1. each of the vendors providing a copy of the requisite resolutions passed by its
shareholders and/or board of directors ratifying, approving and/or authorising the
Acquisition;
5.2. each of the purchasers providing a copy of the requisite resolutions of its board of
directors and/or shareholders ratifying, approving and/or authorising the terms and
conditions of the Acquisition;
5.3. Adapt IT Holdings providing a copy of the resolutions of its board of directors
approving the terms and conditions of the Acquisition;
5.4. all the transaction agreements encompassing the Acquisitions being concluded
and becoming unconditional in accordance with their terms;
5.5. to the extent applicable, the South African Reserve Bank granting approval for the
payment of any portion of the purchase consideration, or any part thereof, to the
relevant vendors;
5.6. various key agreements being concluded or validly transferred, on terms
acceptable to the parties thereto, and same becoming unconditional in accordance
with their terms;
5.7. various key individuals and/or employees entering into service/consulting and
restraint of trade agreements with the relevant purchasing entities.
6. Effective Date
The legal effective date of the Acquisition is 1 July 2017 and CDR Live will be
consolidated into Adapt IT Holdings’ results from the Closing Date, as detailed in
paragraph 7 below.
7. Closing Date of the Acquisition
The closing date of the Acquisition is the seventh business day after all of the conditions
precedent, as detailed in paragraph 5 above, have been fulfilled or waived.
8. Confirmation in Respect of a New Subsidiary
8.1. Following the completion of the Acquisition, LGR Analytics will become a wholly-
owned subsidiary of Adapt IT Holdings, as contemplated in the Companies Act 71
of 2008.
8.2. Adapt IT Holdings hereby confirms that:
8.2.1. the provisions of the constitutional documents of LGR Analytics will not
frustrate Adapt IT Holdings in any way from compliance with its
obligations in terms of the Listings Requirements of the JSE (“Listings
Requirements”); and
8.2.2. nothing contained in the constitutional documents of LGR Analytics shall
relieve Adapt IT Holdings from compliance with the Listings Requirements of the JSE.
9. The Value of, and Profits attributable to CDR Live
9.1. The value of the net assets that are the subject of the Acquisition as at
28 February 2017, was USD2 838 972.
9.2. The loss after tax attributable to the net assets that are the subject of the
Acquisition for the year ended 28 February 2017, was USD1 460 710. The loss
after tax results primarily from a software amortisation charge of USD1 880 744.
EBITDA attributable to the net assets that are the subject of the Acquisition for the
year ended 28 February 2017, was USD658 945.
10. Categorisation of the Transaction
The Acquisition is classified as a Category 2 transaction in terms of the Listings
Requirements.
11. Withdrawal of Cautionary Announcement
Shareholders are advised that the Cautionary Announcement (which pertained to the
Acquisition) is hereby withdrawn, and caution is no longer required to be exercised by
shareholders dealing in Adapt IT Holdings’ securities.
12. Further Announcement
Shareholders will be notified once the last of the conditions precedent has been fulfilled
or waived.
Durban
22 November 2017
Sponsor
Merchantec Capital
Legal Advisor to Adapt IT Holdings
Eversheds Sutherland (SA) Incorporated
Date: 22/11/2017 11:56:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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