Huge Group has abandoned its efforts to play a role in the future of Adapt IT. That much is clear after it emerged on Tuesday that it has sold the shares it acquired as part of its earlier aggressive pursuit of the JSE-listed software services group.

Adapt IT, which published its 2021 financial results on Tuesday, confirmed that Huge Group had sold the 1.9% of the group it acquired through its unsolicited share-swap offer to Adapt shareholders.

Adapt IT is now very likely to be acquired by another suitor, Canada’s Volaris Group, and delisted from the JSE. Volaris Group is offering shareholders R7/share in cash, sweetened from an earlier R6.50/share cash offer.

On 2 August, Huge Group revealed that Adapt IT shareholders holding 2.61 million Adapt IT shares – representing 1.9% of Adapt IT’s total ordinary share capital, excluding treasury shares – had accepted its offer. As a result, Huge delivered 3.58 million Huge shares in settlement to those shareholders.

The small take-up of the Huge offer paved the way for the Volaris offer to proceed, with Adapt IT shareholders in July approving all resolutions tabled at a general meeting.

When the results of the Huge offer were made public, CEO James Herbst said the company was not giving up on its pursuit of Adapt IT. “There isn’t anything stopping Huge from building on its stake in Adapt IT, and this is certainly one of the options we will be considering.”

‘Stated priority’

Huge Group chairman Duarte da Silva said in a statement at the time that Huge Group would be prepared to work with Volaris Group “as a fellow shareholder, if they successfully navigated their transaction obstacles”.

“If they don’t proceed with their offer, then working with existing Adapt IT stakeholders remains our stated priority… As a fellow Adapt IT shareholder, and now one of the top 10 largest shareholders, we will be carefully monitoring the various aspects of the Volaris offer, not least being South African regulatory approvals.”

Huge Group chief operating officer Andy Openshaw added: “There will be commentators that will argue that a 1.9% shareholding in Adapt IT is not worth keeping and that we should sell these shares in the market and raise R18-million, or ultimately sell these shares to Volaris at R7/share if they proceed with their offer.

Huge Group sold its shares because the increase to R7 was not enough upside for the downside risk of the Volaris offer not closing…

“While this would be consistent with our message to Adapt IT shareholders that there are risks to holding shares in an unlisted, foreign-held private company, it would not be consistent with our message to Adapt IT shareholders that they would retain exposure to Adapt IT by swapping their Adapt IT shares for Huge shares. We will have to canvass these Adapt IT shareholders before making any decision,” Openshaw said.

Asked on Tuesday why Huge Group had now decided to exit its position in Adapt IT, CEO James Herbst said: “It was a risk assessment. Huge Group sold its shares because the increase to R7 was not enough upside for the downside risk of the Volaris offer not closing and the share possibly falling back to pre-offer levels.” — © 2021 NewsCentral Media