Cash-out or bigger picture decisions for Adapt IT shareholders

Adapt IT tells shareholders to wait for the independent board to weigh in on Huge Group’s increased offer.

Adapt IT shareholders are waiting on Toronto-based software acquisitions firm Volaris to come up with a counteroffer after Huge Group upped the ante in line with the Independent Board’s recommendations. Shareholders have a difficult choice to make about the company’s future: whether to take the money or become part of a bigger locally listed enterprise under Huge Group.

Barely 48 hours after Huge Group raised the stakes on the ongoing bidding war, Adapt IT released a cautious statement on its position. The independent board appointed to vet both offers said that while the Volaris offer falls below the determined fair price, it isr regarded as reasonable by Adapt IT shareholders.

Volaris is offering a cash deal of R6.50 per share, after which the JSE-listed company would be delisted. Should the deal be accepted, Volaris plans to use Adapt IT to reach a broader African market while keeping the current management running operations.

The offer from Huge Group, which is viewed as unsolicited and hostile, is based on a share swop of R9.09 per share, from the initial January offer of R5.52. This is based on increasing the swap ratio of Huge Group shares offered per Adapt IT share from 0.9 to approximately 1.37 Huge shares.

However, the latest statement, which noted Huge Group’s increased offer, said the independent board argued that the ratio value places each share at R7.21 and not R9.09. “Based on the closing price of a Huge share of 526 cents on 27 May 2021, being the last day prior to the revision of the Huge offer consideration, the actual revised offer consideration equates to 721 cents per Adapt IT Share,” read the statement. Both companies are arguing that their intrinsic value is higher than the reflected share price.

Adapt IT also reiterated that the Volaris deal had garnered irrevocable undertakings from 47.7 percent of shareholders. The company has advised shareholders not to make any decisions based on the new offer from Huge just yet, and to wait for the independent board to weigh in.