The R1-billion buyout of JSE-listed technology firm Adapt IT by Canadian software company Volaris Group now looks like a dead cert. 

Volaris and SA-based technology firm Huge Group were in a heated battle to acquire Adapt IT, a company that provides software solutions in several industries, from education to hospitality.  

The battle for Adapt IT has morphed into a hostile takeover. In January 2021, Huge offered R5.52 a share for Adapt IT – then Volaris trumped that, with an offer of R6.50 a share, which was later sweetened to R7. Huge’s offer valued Adapt IT at nearly R800-million while Volaris placed a value of nearly R1-billion. 

But Volaris now has the upper hand after it emerged on Tuesday, from Adapt IT’s 2021 financial results, that Huge has apparently abandoned its bid for the company.

Huge has sold its 1.9% shareholding in Adapt IT, which was part of its early work to acquire the company. Huge acquired the shareholding through a share swap arrangement in which Adapt IT shareholders were awarded Huge shares. In other words, less than 2% of Adapt IT’s shareholders supported Huge’s offer.

Some market watchers argued that Huge’s 1.9% shareholding was small and would fail to push its Adapt IT takeover efforts over the line. Huge’s 1.9% shareholding was not worth keeping, market watchers argued, adding that the company should sell its Adapt IT shares to the market, and walk away from the potential deal. This has now happened.

Newly appointed Adapt IT CEO Tiffany Dunsdon told Business Maverick that the board’s focus is garnering full shareholder support for the Volaris offer, which currently enjoys a shareholder backing of about 87%. After increasing shareholder support, the next hurdle would be for the offer to be approved by competition authorities as early as December 2021. By then, Adapt IT would also delist from the JSE. 

Dunsdon said Volaris is the best fit for Adapt IT because both companies are in the technology and software space — but the former is much bigger than the latter and has exposure to several markets including the rest of Africa. 

“Volaris acquires software companies and has the same business strategy as we do. Volaris wants Adapt IT to represent them on the African continent as part of their acquisitive arm,” said Dunsdon. 

Dunsdon’s plans for Adapt IT

Dunsdon was thrown into the CEO role after her predecessor, Sbu Shabalala, resigned in August amid a messy court case in which his estranged wife accused him of ordering armed men to beat up her new partner. Read here.

Dunsdon is an Adapt IT insider. Before being appointed CEO, she served as the chief commercial officer and has been instrumental in the company’s growth. She was once the CEO of InfoWave and was involved in planning the company’s merger with Adapt IT in 2007. 

Dunsdon is seen as a good fit for Adapt IT as she knows the company well. But there were rumblings about her running Adapt IT from Australia, as she has lived in Perth for the past 12 years. But she’s comfortable running things from Down Under even though the company generates most of its profits in South Africa.

“I have a strong team in SA. If the pandemic has taught us anything, it is that we can work virtually anywhere. We have subsidiaries in nine countries, with customers in 55 countries. We have offices in eight countries. People are highly efficient without the travel.”

Before Covid-19 flooded the world, Dunsdon said she visited SA six or seven times a year. She plans to resume this schedule once travel bans are lifted.  

For now, she’s engineering Adapt IT’s growth plans in the wake of the Volaris transaction, which includes acquiring software companies in East Africa. 

Dunsdon and the board have been focusing on reducing Adapt IT’s debt to give the company room to raise capital to fund acquisition opportunities. Adapt IT’s net gearing – a key metric for measuring a company’s debt position – improved from 45% to 17%. 

“We can raise capital if we need to, for the right kind of assets.” DM/BM