JSE-listed technology services group Adapt IT is acquiring CDR Live for R42.8m in cash in a deal that will expand its footprint in South Africa and Australia and give it a toehold into the US market.

The deal is being structured through four transaction agreements, in terms of which Adapt IT will acquire CD Live, the issued share capital of and shareholder claims in CDR subsidiary, the US-based LGR Analytics, and the businesses of its subsidiaries LGR South Africa and LGR Australia, as well as LGR Telecommunications South Africa and LGR Telecommunications Australia.

The LGR Group, through its operating subsidiaries, is a specialist solutions provider with an exclusive focus on the global telecoms industry, Adapt IT said in a statement to shareholders on Wednesday. It was founded 18 years ago and provides data warehouse and business intelligence systems to operators.

There is also a contingent earn-out amount, which will be determined based on the performance of the business for the financial year commencing 1 July 2017 and ending 30 June 2018, limited to a maximum R31.2m, which will be settled via the issue of Adapt IT shares in the second half of next year.

In relation to LGR Analytics, the purchase consideration is to be determined based on the earnings before interest, tax, depreciation and amortisation (Ebitda) achieved for two years after the award of a specified contract by the business, by no later than 30 June 2018, limited to a maximum purchase consideration of US$1m. Failing that, the purchase price will be $1. The value of the net assets that are the subject of the acquisition as of 28 February 2017 was $2.8m, while Ebitda was $659 000. The assets reported a loss after tax of $1.9m, primarily from a software amortisation charge of $1.9m, Adapt IT said.

“CDR Live is a software-based business that owns its own intellectual property and has annuity-based revenue streams,” Adapt IT said in its note to shareholders. “Its intellectual property and customer base, together with its experience working with large global telecoms 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.”

It said the acquisition provides revenue and geographic diversification. “All revenue is hard-currency-denominated from customers outside of South Africa, which creates improved revenue diversification for Adapt IT shareholders.”

Adapt IT shares were trading at R6.40 at 12.24pm in Johannesburg. The counter has shed 60% of its value since the beginning of the year, making it one of the worst performing shares on the JSE in 2017. — © 2017 NewsCentral Media