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ADCORP HOLDINGS LIMITED - Disposal of Dare, Withdrawal and Renewal of Cautionary
2020/09/22 13:56:00Download PDF Stock report
Disposal of Dare, Withdrawal and Renewal of Cautionary
ADCORP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1974/001804/06
Share code: ADR & ISIN: ZAE000000139
('Adcorp' or 'the Company' or “the Group”)
DISPOSAL OF DARE HOLDINGS (PROPRIETARY) LIMITED AND ADCORP HOLDINGS
SINGAPORE (PRIVATE) LIMITED, WITHDRAWAL AND RENEWAL OF CAUTIONARY
1. Introduction
Adcorp shareholders are hereby advised that Adcorp, via its wholly-owned subsidiary, Adcorp Holdings Australia
(Proprietary) Limited (“Seller”), has entered into a binding agreement (“Agreement”) with Competentia (Proprietary)
Limited“(“Competentia” or the 'Buyer”) on 21 September 2020 (“Signature Date”) in terms of which the Buyer has
agreed to acquire 100% of the issued shares of Dare Holdings (Proprietary) Limited (“Dare”) and Adcorp Holdings
Singapore (Private) Limited incorporating Dare Energy (Proprietary) Limited (“Adcorp Singapore”) (together, the
“Target”) from the Seller, for an estimated cash consideration of AUD 3.44 million (ZAR 41.42 million) as more fully
set out in paragraph 5.2 below (“Disposal”).
2. Information on the Target
Acquired by Adcorp in 2015, Dare is an independent contracting business which focuses on specialist industrial
needs and workforce solutions concentrating on the Oil and Gas, Mining, Construction and Engineering industries.
Dare provides technical skills placements in Australia and Asia with a presence in Singapore through Adcorp
Singapore by sourcing highly qualified and experienced temporary, contract and permanent staff for local, national
and international clients.
3. Information on the Buyer
Competentia is a global staffing company focused on building and managing workforces in the Energy and
Resources industry. By forming strategic partnerships built on trust and mutual confidence, Competentia offers
staffing solutions ranging from recruitment and onboarding to training, payrolling and mobilising human capital.
4. Rationale for the Disposal
Adcorp’s management and the board of directors (“Board”) have, over the past 12 months, performed a rigorous
assessment of the Group’s strategic position in the Australian market. Given the challenges experienced in that
market, the Board has decided to explore opportunities to exit this geography. This will allow the Group to focus its
investment on stabilising and growing its South African operations. The Disposal is also consistent with the Group’s
long-term strategy to focus its activities on its core capabilities and to utilise the proceeds from the sale of non-core
assets to reduce the Group’s gearing.
Adcorp management and the Board believe that the Disposal will position the Group for long-term sustainability and
value creation for Adcorp shareholders. Liquidity management is a priority for Adcorp and as a consequence a
diligent focus on cash collections and cost management in the current financial year has enhanced the Group’s
liquidity position particularly over the COVID-19 period.
The proceeds received in respect of the Disposal Consideration (as defined in paragraph 5.2 below) will further
enhance Adcorp’s liquidity position and will be applied towards reducing the Group’s debt.
5. Terms and conditions of the Disposal
5.1 Effective Date
The Disposal will become effective no later than 5 business days after the satisfaction or waiver of the last of
the Conditions Precedent (as defined in paragraph 5.3 below) or as otherwise agreed by the parties
(“Completion”).
5.2 Disposal Consideration
The Disposal Consideration will be the sum of:
i. the value based on the consolidated net assets of the Target on the Signature Date which is estimated
to be a total amount of AUD 3.44 million (ZAR 41.42 million), less AUD 150 thousand (ZAR 1.81 million)
as set out in paragraph 5.2 (ii) below (“Completion Consideration”);
ii. AUD 150 thousand (ZAR 1.81 million) if, within the 6 to 12 month period post Completion, the Target
reports a minimum Gross Contractor Margin (as defined below) of AUD 230 thousand (ZAR 2.8 million)
(“Business Shut Down Costs”) in any one month;
iii. if the aggregate sum of the (i) gross service fees charged to clients of the Targets less (ii) the sum of
remuneration, superannuation, worker’s compensation insurance, payroll tax and other statutory
charges paid or payable to contractors providing services to such clients (“Gross Contractor Margin”)
during any 12 month rolling period within the 24 month period commencing on the Completion Date
(“Milestone Period”), is greater than or equal to specified amounts in respect of 10 separate milestones
(“Milestone(s)”), upon the occurrence of each Milestone, the Buyer must pay AUD 50 thousand (ZAR
602 thousand) to the Seller (“Milestone Payments”), the aggregate of which are capped at a total
amount of AUD 500 thousand (ZAR 6.02 million); and
The Completion Consideration, together with the adjustments in respect of the Business Shut Down Costs and
Milestone Payments is estimated to be AUD 3.94 million (ZAR 47.44 million), and capped at a maximum amount
of AUD 4.5 million (ZAR 54.18 million) (“Disposal Consideration”).
The Disposal Consideration will be settled by way of an initial payment of AUD 2.60 million (ZAR 31.30 million)
and the remainder, to the extent applicable, on the dates that each of the above milestones are achieved.
5.3 Conditions Precedent
The Disposal is subject to the fulfilment or waiver of the following outstanding conditions (“Conditions
Precedent”) by 16 December 2020:
5.3.1 each of the employees, having been identified by the Buyer as critical to the operations of the
businesses conducted by the Target (“Key Employees”) having entered into new employment
agreements with the Buyer or an entity designated by it, on terms and conditions specified in the
Agreement;
5.3.2 the Seller having delivered to the Buyer, signed discharges of any and all Security Interests as defined
in section 12 of the Personal Property and Securities Act 2009 (Cth) which are registered on the
Personal Property Securities Register in relation to Dare or Adcorp Singapore;
5.3.3 the Seller having procured a sublease in respect of the premises currently leased by the Seller from
which Dare currently operates (“Premises”), to the Buyer, for a period of 9 months from the Effective
Date, with an option to sublease the Premises for further periods each of 6 months until the end of the
term of the lease, being 31 May 2022;
5.4 Representations and Warranties
The Agreement contains representations and warranties by the Seller in favour of the Purchaser, and by the
Purchaser in favour of the Seller, as is standard for a transaction of this nature.
6. Financial information
The value of the net assets that are the subject of the Disposal and the profits attributable to the net assets that
are subject of the Disposal are AUD 3.44 million (ZAR 41.42 million) and AUD 984 thousand (ZAR 11.85 million)
respectively (“Financial Information”).
The Financial Information has been extracted from the Group’s unaudited results for the year ended 29 February
2020, was prepared in terms of IFRS, is the responsibility of the Board and has not been reported on or reviewed
by a reporting accountant.
7. Categorisation
In terms of the JSE Listings Requirements, the Disposal is classified as a Category 2 transaction for Adcorp, which
requires an announcement.
8. Withdrawal and renewal of cautionary announcement
Shareholders are advised that, as all the terms of the Disposal have now been announced, shareholders are no
longer required to exercise caution in respect of the Disposal.
However, shareholders are still required to exercise caution as negotiations regarding the disposal of the Financial
Services division are still ongoing and if successfully concluded, may have a material effect on the price of the
Company’s securities.
Johannesburg
22 September 2020
Sponsor:
PSG Capital
Legal Advisor:
Moulis Legal
Date: 22-09-2020 01:56:00
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