Huge Group’s message to Adapt IT shareholders

Huge Group has released a video that promotes its offer to Adapt IT shareholders, saying it provides better prospects to shareholders than Volaris’ R7.00 per share cash offer.

This video followed a statement from Adapt IT on 30 June 2021, saying all resolutions with regards to the Volaris cash offer have been approved by the requisite number of shareholders.

Huge Group and Volaris are currently fighting for favour among Adapt IT shareholders, which will decide in which direction the company will go.

  • Huge Group is offering Adapt IT shareholders 1.37 Huge shares for each Adapt IT share.
  • Volaris is offering Adapt IT shareholders R7.00 cash for each Adapt IT share.

At the recent Huge Group general meeting, 90% of their shareholders were represented, and 99% voted in favour of its Adapt IT takeover bid.

The Huge Group offer drew criticism from analyst Theo Botha, who said the goodwill on the company’s balance sheet is inflated which leads to an overvalued share price.

There have also been questions about the Huge Group’s share price liquidity and its BEE credentials.

Huge Group hit back, saying the goodwill on Adapt IT’s balance sheet is a lot higher than theirs.

“When you run the calculation, you may arrive at a different conclusion than Theo Botha,” said Huge Group CEO James Herbst.

Huge Group video

The company has also released a video to discuss their offer, which is embedded at the end of the article. The full transcript of the video is provided below.

Recently, an independent expert appointed by Adapt IT’s independent board decided that each of your Adapt IT shares is worth a minimum of R7.00 and a maximum of R9.09. They also said that your Adapt IT shares are most likely worth R8.05 each.

Did you know, at a shareholders’ meeting held on the 30 June 2021, something called the Volaris scheme was approved. In terms of the scheme, if the conditions to the Volaris offer are met, you can elect to keep your Adapt IT shares, but you need to be aware that a resolution was also passed allowing Volaris to delist your shares from the JSE.

This means that you will end up holding shares in an unlisted private company without the minority protections you have enjoyed while holding your Adapt IT shares in a listed format on the JSE. There will also only be a few parties who might want to buy your shares in the future, so the current liquidity of your share will drastically decrease.

We are offering to give you 1.37 Huge shares for every Adapt IT share you own.

Volaris is offering to give you R7.00 for each Adapt IT share you own, so our offer is greater!

So let us unpack our offer to you. If you accept our offer, you will swap your listed Adapt IT shares for listed Huge shares and Huge will hold your Adapt IT shares on your behalf. This will be similar to holding a unit in a unit trust which owns Adapt IT shares but in the case of our offer, with more exposure to Adapt IT’s underlying businesses.

If you do not accept our offer, you cannot sit back and do nothing because if you do nothing you will be sold out and only get R7.00 for each of the Adapt IT shares that you own and remember that this is the minimum value that the independent expert has placed on each of your shares, and this is of course before you pay tax.

Huge’s shareholders and Adapt IT’s shareholders are ‘Better Off Together’. Look how the profiles of both companies have increased in the last six months. A wider investment audience can be created by joining forces. Investment scale counts – in the listed environment size certainly does matter!

You are one of about 12 500 Adapt IT shareholders to whom we are talking…

You have the power to decide your own fate. Determine your own fate; don’t let Volaris decide it for you. Your future is in your hands for now…

We made the Huge offer because we believed we could create long-term shareholder value for Adapt IT shareholders and Huge shareholders. We have already demonstrated the positive impact we can make.

We are looking to build an investment vehicle with critical mass, measured by the number of shareholders and its market value. We are looking to aggregate strategically aligned entities, not slap them together. We believe in the involvement of founders and executive teams who all have a vested interest.

Our R9.09 offer to you is the maximum price tabled by the independent expert, it is 65% higher than our initial offer and 30% better than Volaris’ R7.00 offer, which only just scrapes in as fair.

If BBBEE and transformation worry you – don’t let it. Huge is South African. We understand transformation and it is important to us. The independent board of Adapt IT has questioned Huge’s transformation status and its transformation initiatives, while supporting the Volaris offer, which will see control of Adapt IT transferred to foreigners. These two positions cannot be reconciled.

The independent board of Adapt IT has also questioned the liquidity of Huge’s shares in the market. How can they question Huge’s liquidity and support the Volaris alternative of remaining a shareholder in a foreign-controlled, private company? Isn’t this questioning simply dishonest?

Choose to stay listed – accept the Huge Offer. Don’t expose yourself to the vagaries of a minority shareholding in an unlisted and foreign held private company who are new and removed from what transformation means to South Africans.

Our view has always been that you should retain your exposure to Adapt IT to benefit from the upside we see in Adapt IT and a larger Huge. There is no need for you to take cash now and cauterize your upside. Imagine if you had accepted or signed an irrevocable undertaking, today you would be missing out on an extra R2.09 per share! With our share for share offer, your upside isn’t limited.

On the 6 July the Huge offer became unconditional. So, you can contact your CSDP and accept the Huge offer.

Accept our R9.09 offer, retain your upside, get exposure to Huge and help us to help you grow your investment value. Together we can be Huge.

Huge Group message to Adapt IT shareholders

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Huge Group’s message to Adapt IT shareholders