SUPER GROUP LIMITED - Acquisition of the DIG Group

Evidence from the filing

• The acquisition strategically expands Super Group's fleet solutions by capturing a previously untapped market, directly aligning with the Group's growth strategy for selective acquisitions.

  “Super Group's strategy includes selective acquisitions in its core supply chain, fleet solutions and dealerships businesses. The acquisition of DIG will significantly complement the Group's fleet solutions offering, capturing a market currently untapped by Super Group.”

• DIG Group operates in a sector characterized by high barriers to entry, strong safety compliance requirements, and significant upfront capital investment, indicating a defensible and high-quality business.

  “As a result of its innovative management, established Original Equipment Manufacturer relationships, well maintained modern diversified fleet and its strategically located facility, the DIG Group remains well positioned in a sector which has strict safety compliance requirements, comprehensive customer induction and onboarding protocols, together with high upfront capital investment barriers.”

• The acquired entity, DIG Group, demonstrates strong profitability, reporting a normalised Profit After Tax of R191.5 million for the year ended 28 February 2025.

  “The DIG Group's normalised Profit After Tax was R191 513 390 (R151 568 225 per the aggregated audited annual financial statements) for the year ended 28 February 2025.”

• The structure of the acquisition, including the seller retaining a 30% stake, the retention of DIG's management team, and profit warranties for F2026 and F2027, ensures strong alignment of interests.

  “The Seller will retain the remaining 30% of the shares held by him in the Sale Companies. DIG's management team will remain employed in the businesses.”

• The fulfillment of all suspensive conditions provides certainty that this strategic acquisition will proceed as planned.

  “All of the suspensive conditions in the Agreement have been fulfilled.”

• The acquisition consideration, including deferred payments and a put option, amounts to a potential R1.108 billion for 100% of DIG, representing a significant premium over the audited net asset value.

  “The purchase consideration in relation to the Acquisition comprises of R448 million settled in cash, a deferred component in the form of a deferred contingent profit warranty payment capped at the maximum value of R160 million and the Put Option exercisable on the 5th anniversary of the effective date based on fair value at the time of exercise capped at the maximum value of R500 million, and will be satisfied in cash. (...) The net asset value per the aggregated audited annual financial statements amounted to R374 358 014 as at 28 February 2025.”

• Super Group is significantly increasing its exposure to the volatile and cyclical mining sector (coal, chrome, and gold mining), which is an 'untapped market' for the Group.

  “The acquisition of DIG will significantly complement the Group's fleet solutions offering, capturing a market currently untapped by Super Group. (...) The DIG Group is a plant and equipment hire business, headquartered in Johannesburg. Founded in 2002, the DIG Group is currently active across 19 mining sites, supporting clients in coal, chrome and gold mining.”

• The announcement relies on 'normalised' financial figures which are materially higher than the 'aggregated audited annual financial statements', raising concerns about the true underlying profitability.

  “The combined fair net asset value of the Sale Companies amounted to R575 976 254 (The net asset value per the aggregated audited annual financial statements amounted to R374 358 014) as at 28 February 2025. (...) The DIG Group's normalised Profit After Tax was R191 513 390 (R151 568 225 per the aggregated audited annual financial statements) for the year ended 28 February 2025.”

• The long effective date of 1 March 2026 creates a prolonged period of uncertainty.

  “The Acquisition will be effective on 1 March 2026.”

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