Sasfin Securities deputy chairman, David Shapiro, says there will be pressure on Volaris and Huge Group to step back from their plans to acquire Adapt IT following allegations of armed assault against CEO Sbu Shabalala.
Shabalala is accused of ordering heavily armed men to assault the partner of his estranged wife Neo Shabalala, who is now in critical condition in hospital.
A Sunday Times report, citing affidavits from Neo Shabalala and her friends, said five men armed with automatic rifles, handguns, and batons entered her home on Saturday 1 May.
Neo said the armed men then brutally assaulted her partner Sipho Nzuza, an eThekwini city manager.
Following this assault, Sbu allegedly pressured her to sign a legal agreement linked to a battle over money. Neo is claiming part of Sbu’s assets which she says is over R133 million.
On Monday, the day after the news broke, Adapt IT’s share price fell by over 12%. Later that day the company announced Shabalala was stepping down to attend to personal matters.
“Sibusiso Shabalala, the current CEO, has been granted a leave of absence for three months by the board to attend to personal matters,” Adapt IT said.
The company’s chief commercial officer, Tiffany Dunsdon, is serving as interim CEO while Shabalala is on leave.
On Tuesday, Shabalala released a statement saying the allegations against him were without merit, describing it as a “cold-hearted campaign” which must be condemned.
Shabalala said he has decided to take extended leave following advice from those who care about him.
“The last five months have been some of the most difficult of my life. After more than 15 years of the relentless work of building a JSE-listed entity, I need a little respite,” he said.
“In the midst of this, I am now being accused of violent and uncharacteristic behaviour, in what is clearly an unrelated attack. I have been caught in the crossfire.”
Many market commentators, including Biznews founder Alec Hogg and ICT analyst Irnest Kaplan, expressed surprise at the allegations.
They described Shabalala as a softly spoken gentleman who never gave the impression that he was a violent person.
These allegations come at a sensitive time for Adapt IT. The company has received acquisition offers from Huge Group and Canadian-based Volaris.
Adapt IT and Volaris recently said shareholders holding 44.4% of Adapt IT shares supported the offer from Volaris to acquire control of Adapt IT.
Huge Group, however, believes their offer is better for Adapt IT shareholders in the long run.
Huge Group CEO James Herbst told MyBroadband Huge Group and Adapt IT were “better off together” and remaining listed.
Commenting on the allegations against Shabalala, Shapiro said he hopes an explanation for what has allegedly transpired comes out in the next three months.
He said the challenge for Volaris and Huge Group is that, even if there is an explanation, there will be pressure on them to step back.
“Where I am worried, and where I am expressing concern, is that Volaris and its parent company Constellation do not want to be associated with any incident like this,” he said.
Shapiro highlighted that companies in these situations tend to say “thank you very much” and withdraw. “Even Huge Group may do the same,” he said.
Somewhere down the line they may pick up some of Adapt IT’s assets, but Shapiro said it would be “very difficult for Volaris and Huge Group to continue “as long as Shabalala is around or associated”.
“I am concerned about that side of it. Sbu might have to go. He might have to resign and sell his shares for the deals to continue,” Shapiro said.
“The last things you [Volaris and Huge Group] want to do is go to the boardroom and be faced with angry shareholders saying ‘How can you continue? How can you have this person with you?’.”
Responding to Shapiro’s comments, Adapt IT’s Dunsdon said Shabalala is not a member of the independent board of the company which is tasked with providing its opinion to shareholders on the two offers.
“The independent board of the company continues to perform its duties in relation to both offers proactively, which are governed by regulatory timelines and processes,” she said.
Dunsdon added that Adapt IT remains in active discussions with Volaris as would be normal for an offer process.
“Adapt IT cannot comment further on this process and the next steps will be published in accordance with the publicised timetable,” she said.
MyBroadband asked Volaris and its parent company Constellation Software for comment on whether the allegations against Shabalala had put the deal at risk, but they did not respond by the time of publication.
Huge Group also did not comment on whether the allegations against Shabalala would influence their offer.