EOH Holdings is selling several more assets as it moves to deal with the gearing problem on its balance sheet. Its shares leapt higher on the news.

The JSE-listed IT services group, which recently told investors that it is mulling various strategic options, including a possible rights offer, said its subsidiary EOH Mthombo is planning to sell 100% of Hoonar Tekwurks Consulting South Africa, Managed Integrity Evaluation, Xpert Decision Systems and Zenaptix, collectively known as Information Services.

Information Services is to be acquired by an entity called Bachique 842. This is a South African-registered company wholly owned by LR Africa Holdings, which in turn is advised by Lightrock, a global private equity platform backed by the Princely House of Liechtenstein and LGT, an international private banking and asset management group.

The Information Services entities provide credit checks, background screening, and big data, analytics and technology in South Africa.

“Information Services has evolved over the years from a data provider to a holistic solution provider for risk mitigation and data analysis tools, with each division focusing on a specific subset of data-driven solutions,” EOH said in a statement to investors on Friday.

EOH said the disposal represents a “significant milestone” in using asset sales to deleverage its balance sheet. “The proceeds of the transaction, net of costs, will assist EOH in creating a more sustainable capital structure and will primarily be applied to reduce debt,” it said.

The deal value will be calculated “with reference to an enterprise value of R445-million and shall be an amount equal to the base purchase price of R417-million, adjusted for final net debt and working capital benchmarks, certain once-off items and locked-box adjustments as at 31 July 2021”, it added.

Conditions

“Interest will accrue on the cash consideration from the locked-box date up to (and including) the closing date. The purchaser will fund the purchase consideration from equity and third-party debt.”

The deal is subject to the fulfilment of various conditions, including regulatory, lender and shareholder approvals. Bachique can also terminate the deal if a “material adverse event occurs in relation to Information Services”.

Information Services had a net asset value as at 31 July 2021 of R344-million (R135.6-million excluding related goodwill and identifiable intangible assets). At its financial year-end (also July 2021), it reported audited attributable profit after tax of R79.1-million (R37.9-million excluding identifiable amortisation on group recognised intangible assets and once-off non-cash gains).