Wrap Text
Proposed acquisition of Adapt It shares, update on general offer to Adapt It shareholders and cautionary withdrawal
HUGE GROUP LIMITED
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
(“Huge”)
THE PROPOSED ACQUISITION OF ORDINARY SHARES IN THE ISSUED SHARE CAPITAL OF
ADAPT IT HOLDINGS LIMITED AND AN UPDATE ON THE GENERAL OFFER TO THE
SHAREHOLDERS OF ADAPT IT HOLDINGS LIMITED AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
Huge shareholders (“Huge Shareholders”) are referred to the announcement
released by Huge on SENS on 27 January 2021 (“Detailed Cautionary
Announcement”), advising that Huge had given notice (“Notice”) to the board of
directors of Adapt IT Holdings Limited (“Adapt IT”) that Huge has made a general
offer (“Offer”) as contemplated in section 117(c)(v) of the Companies Act, 2008 (as
amended) to the holders of ordinary shares (“Adapt IT Shareholders”) of Adapt IT
(“Adapt IT Shares”) to acquire up to 100% of the issued Adapt IT Shares (“Proposed
Transaction”).
2. Terms of the Proposed Transaction
Huge has irrevocably offered to purchase from each Adapt IT Shareholder all, or
any, of their Adapt IT Shares for a consideration (“Sale Consideration”) equivalent
to 552 cents per Adapt IT Share. Huge shall discharge its obligations in relation to
the Sale Consideration by issuing to each Adapt IT Shareholder that accepts the
Offer, ordinary shares in Huge (“Huge Shares”), at a swap ratio (“Swap Ratio”) of
0.9 Huge Shares for each Adapt IT Share tendered (rounded up to the nearest
whole number). The Swap Ratio is based on a reference price of 613 cents per Huge
Share.
If the Offer is accepted by all Adapt IT Shareholders resulting in the acquisition by
Huge of the entire issued share capital of Adapt IT, it will result in a maximum total
purchase consideration of R799 778 983 and a maximum Sale Consideration settled
by the issue of approximately 130 398 747 new Huge Shares representing 80.12% of
Huge Shares currently in issue, which excludes treasury shares.
3. Conditions precedent
Both the Offer, and the Proposed Transaction, are subject to the fulfilment of the
following conditions precedent (“Conditions Precedent”):
3.1 Huge Shareholder approval in terms of paragraph 9.20 of the JSE Listings
Requirements (see paragraph 4 (Irrevocable undertakings) below);
3.2 that the minimum percentage of Adapt IT Shares required to be tendered
by Adapt IT Shareholders before Huge is required to accept all tendered
Adapt IT Shares is 0.01% of the Adapt IT Shares; and
3.3 the issue of a compliance certificate by the Takeover Regulation Panel, in
relation to the Offer, as contemplated in Regulation 102(13) of the
Companies Regulations, 2011.
The Proposed Transaction will be effective on the date of fulfilment of the last of the
Conditions Precedent.
4. Irrevocable undertakings
As stated in the Notice, the board of directors of Huge (“Board”) again confirms
that Huge is ready, able and willing to implement the Offer.
As stated in paragraph 3.1 above, the Offer is conditional upon, inter alia, the Huge
Shareholders having approved the implementation of the Proposed Transaction in
terms of paragraph 9.20 of the JSE Listings Requirements.
In this regard, the Board has procured irrevocable undertakings from Huge
Shareholders holding 79.57% of the issued share capital of Huge to vote in favour of
the resolutions necessary to implement the Proposed Transaction and the Offer.
5. Rationale
The businesses of Huge and Adapt IT are aligned and there is visible synergy and
significant value that can be created through vertical consolidation as opposed to
vertical integration – businesses are built on culture and this should be respected
and preserved.
Huge Connect Proprietary Limited, Huge Networks Proprietary Limited, and Huge
Telecom Proprietary Limited are telecommunications service providers who provide
a comprehensive range of connectivity solutions. Adapt IT’s Communications
division is a telecommunications solutions provider, providing specialist proprietary
software and value-added service to the telecommunications industry, which is
offered across mobile network operator core networks and range from next-gen
VAS through to data analytics, Internet of Things (IoT) management, customer
experience, self-service and mobility. Huge’s companies provide services using
mobile networks and so vertical consolidation synergies exist.
Huge Connect provides payment connectivity solutions to retail merchants and in
particular retail merchants operating in the hospitality industry, while Huge Software
Proprietary Limited licences accounting software. Adapt IT’s Hospitality division,
created through the acquisition of Micros South Africa, specialises in the resale,
support, and deployment of software and hardware products, including cloud
solutions and the provision of professional services.
Adapt IT’s Financial Services division provides a range of software solutions that
automate financial statement and assurance engagements, streamline tax
management processes, and enable simplified time and billing management for
about 4 500 audit and accounting firms, government entities, municipalities and
large companies across Africa. Huge Software’s accounting software and Adapt
IT’s Caseware complement each other.
An organisation’s capital structure is critical and should allow it to be optimally
positioned to take advantage of favourable lending rates while also considering
the risk of over gearing should a low interest rate regime reverse. A Huge and Adapt
IT combination would be more favourably perceived by lending institutions and
would be better positioned to withstand any monetary policy reversal. Accordingly,
the Proposed Transaction, if control is achieved, presents Adapt IT Shareholders with
an opportunity to lower their financial risk exposure – the market value of Huge’s
equity over its interest-bearing liabilities provides substantially more cover when
compared to the market value of Adapt IT’s equity and its interest-bearing liabilities.
The Proposed Transaction also presents an opportunity to create a larger entity with
greater critical mass and enhanced liquidity, providing an improved platform to
facilitate acquisitive growth.
6. Adapt IT
Adapt IT provides leading specialised software and digitally-led business solutions
that assist clients across targeted industries to achieve more by improving their
customer experience, core business operations, business administration, enterprise
resource planning and public service delivery.
The organisation has deep sector knowledge and experience predominantly in the
education, manufacturing, financial services, energy, technology expense
management (multi-industries), telecommunications, consumer security and
services, and hospitality industries including public sector.
Adapt IT serves over 10 000 global customers, with headquarters in Johannesburg,
South Africa, and regional offices in Durban and Cape Town. To service
international customers, Adapt IT focuses on the Pan African market, through a
presence in Mauritius, Botswana, Kenya and Nigeria, as well as on the Asia Pacific
market, where the group has a presence in Australia, New Zealand and Singapore.
Through its presence in Ireland, Adapt IT is able to service customers in Europe.
7. Financial information
The net asset value of Adapt IT at 30 June 2020 was R746 494 350, and the profit
attributable to equity holders of the parent for the year ended 30 June 2020 was
R70 652 503.
The financial information disclosed above has been extracted from the Adapt IT
audited consolidated financial results for the year ended 30 June 2020, which was
prepared in accordance with International Financial Reporting Standards.
8. Categorisation and circular
The Proposed Transaction, assuming the Offer is accepted by Adapt IT Shareholders
holding approximately 37.4% of Adapt IT Shares, will result in the Proposed
Transaction being categorised as a Category 1 transaction in terms of the JSE
Listings Requirements, requiring a circular to be despatched to Huge Shareholders
within 60 days, containing a notice of general meeting to obtain their approval.
Should the Offer be accepted to the extent that Adapt IT becomes a subsidiary
company of Huge, as defined in the Companies Act, 2008 (as amended), Huge will
ensure that the provisions of Adapt IT’s memorandum of incorporation do not
frustrate Huge in any way from compliance with its obligations in terms of the JSE
Listings Requirements.
9. Withdrawal of cautionary announcement
Huge Shareholders are referred to the Detailed Cautionary Announcement dated
27 January 2021 and the further cautionary announcement contained in the
announcement dated 1 February 2021 and are advised that as all the details in
relation to the Proposed Transaction have been published, caution is no longer
required to be exercised by Huge Shareholders when dealing in their securities.
10. Responsibility statement
The Board accepts responsibility for the information contained in this
announcement insofar as it relates to Huge. To the best of its knowledge and belief,
the information contained in this announcement is true and the announcement
does not omit anything likely to affect the importance of the information.
5 February 2021
Corporate Advisor and Transaction Sponsor
Questco Proprietary Limited
Legal Advisor
Herbert Smith Freehills South Africa LLP
Date: 05-02-2021 02:55:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
