Adapt IT sale emerges unscathed by assault allegations against CEO

The sale of Adapt IT may not be affected by the recent damaging claims against founder and CEO Sbu Shabalala, with one of the bidders for the company saying the offer stands.

Shabalala is accused of arranging an assault of his estranged wife’s partner on May 1.

James Herbst, CEO of The Huge Group, confirmed a special board meeting to discuss the offer was held on Tuesday morning and the “board’s position remains” to continue with the transaction.

The past five months have been some of the most difficult of my life.

—  Shabalala

Even if Huge wanted to exit the deal, the offer to shareholders was unconditional and they are bound by it. The only exit would be if Huge were unable to acquire a minimum of 14,000 shares, Herbst said.

In January Huge Group made an unsolicited bid to Adapt IT shareholders on the basis of 0.9 Huge shares for every Adapt IT ordinary share or R5.62 per share.

In April, this was followed by a bid from Canadian technology firm Volaris, which also offered to purchase 100% of the company at a cash consideration of R6.50 per Adapt IT Share.

It is unknown if Volaris’s stance has changed on its offer that has a 44.4% vote of approval from Adapt IT’s shareholders. Volaris did not respond to a request for comment by the time of publication.

The Sunday Times reported that suspended eThekwini city manager Sipho Nzuza — partner of Neo Shabalala — was in a critical condition in a Durban hospital and that Shabalala’s wife Neo sought an interdict against her estranged husband on Friday. Nzuza was suspended in April 2020 over alleged tender corruption.

Shabalala has denied the allegations.

Shabalala has been granted three months’ leave from the company to attend to personal matters.

Tiffany Dunsdon will be at the helm as interim CEO during this time. She has served as executive director and chief commercial officer of Adapt IT.

Jon Tullett, research manager of IT services for the Independent Data Corporation in sub-Saharan Africa, expects the deals to remain in play. “On the face of it, it shouldn’t affect the sale. The company is still worth what it’s worth,” he said.

He added that even though shareholders were spooked, the value of the business was not bound to Shabalala. 

The share price dropped from R7.08 per share on Friday last week to R6.10 on Monday. On Tuesday, it recovered slightly to R6.21 per share.

Tullett said this was a personal issue that “may just blow over entirely”.

Shabalala in a statement issued on Tuesday said the allegations are “without merit” and “the best way to deal with them is through the judicial system”. The CEO said ​that “the past five months have been some of the most difficult of my life”. 

On Monday, Adapt IT released a SENS announcement that the fulfilment date or the date for the board to advise on the merits of the Huge and Volaris deals had been further extended to Friday, May 14. This was after an initial extension to May 7.