Hudson Labs Red Flags - Dirty Laundry
Welcome to our weekly reports featuring impactful and usual disclosures as extracted by Hudson Labs' algorithms.
Filings from the week of September 13 - 17, 2021
SKILLSOFT CORP (SKIL)
10-Q | Market cap: $1.3B
Skillsoft went public via SPAC (Churchill Capital Corp II and Software Luxembourg Holding S.A.). The merger was announced in October 2020, and finalized in June 2021. [1]
Bankruptcy and Restructuring
The predecessor company, Software Luxembourg was created in August 2020 to acquire Pointwell, an Irish private company who filed Chapter 11 in the same month. Skillsoft’s Canadian subsidiary also filed Chapter 11 in June 2020. [2]
Cash outflows associated with Chapter 11 filings totaled $32M in the prior year, and included retention bonuses for key employees. [3]
Acquisitions
In addition to the SPAC merger, the company made two acquisitions in June 2021 [4]:
- Albert DE Holdings Inc. (“Global Knowledge”) for a purchase price of $258M.
- Pluma Inc.for a purchase price of $22M.
Costs related to acquisitions totaled $15.8M. [3]
- “On October 12, 2020, Software Luxembourg Holding S.A. (“Software Luxembourg” or “Predecessor (SLH)”) and Churchill Capital Corp II, a Delaware corporation (“Churchill”), entered into an Agreement and Plan of Merger (the “Skillsoft Merger Agreement”) by and between Churchill and Software Luxembourg.” … “On June 11, 2021 (“closing date”), Churchill completed its acquisition of Software Luxembourg, and changed its corporate name from Churchill to Skillsoft Corp. (the “Company”).”
- “Software Luxembourg, a public limited liability company incorporated and organized under the laws of the Grand Duchy of Luxembourg, was established on August 27, 2020 for the purpose of acquiring the ownership interest in Pointwell Limited (“Pointwell”), an Irish private limited company, through a plan of reorganization under Chapter 11 subsequent to August 27, 2020.” ...“The $1.0 million credit in other expenses was a result of deconsolidation of Skillsoft Canada Ltd. in July 2020 when Skillsoft filed prepackaged Chapter 11 with Canadian court.”
- “The $32.0 million of costs in the prior year was attributable to our preparation for a voluntary prepackaged Chapter 11 filing whereas the $15.8 million related to the acquisitions completed in June 2021.” … “Those increases were partially offset by one-time retention bonuses paid to key employees in connection with Skillsoft’s Chapter 11 filing and recapitalization efforts during the three and six months ended July 31, 2020. “
- “On June 11, 2021, the Company completed the acquisition of Albert DE Holdings Inc. (“Global Knowledge” and such acquisition, the “Global Knowledge Merger”), a worldwide leader in IT and professional skills development.” … “On June 30, 2021, the Company acquired Pluma, Inc. The acquisition enhances the Company’s leadership development portfolio product, adds a new modality to its blended learning model, and allows the Company to now offer a premium individualized coaching experience. Cash paid for Pluma in the Successor period was lower than the agreed upon purchase price of Pluma for $22 million due to a contractual holdback and working capital adjustment. The fair value of the net assets acquired included $11.9 million of goodwill and $10.0 million of identified intangible assets, which had a weighted average life of 4 years.”
NET 1 UEPS TECHNOLOGIES INC (UEPS)
10-K | Market cap: $260M
The company has “undergone a significant change in management over the last twelve months, with various long-serving executives having resigned from the organization.”
Such changes include:
- Group CEO Mr. Herman G. Kitz resigned in August 2020. Mr. Chris G.B. Meyer joined in July 2021 (Mr. Alex M.R. Smith, the current CFO, served in the interim).
- Managing Director, Southern Africa Mr. Nunthakumarin Pillay resigned in May 2021 after being with the company for over 21 years.The position was changed to CEO of Net1 Southern Africa with Mr. Lincoln Mail joining.
The company reorganized internal business reporting lines as a result of Mr. Pillay’s resignation. [1]
The company has reputation issues in South Africa as a result of public accusation that they have provided services illegally and defrauded social welfare grant recipients. The company denies wrongdoing. [2]
- “On July 1, 2021, Mr. Chris G.B. Meyer joined us as Group CEO, following the resignation of Mr. Herman G. Kotzé in August 2020. Mr. Alex M.R. Smith, our current CFO, assumed the role of interim Group CEO, from Mr. Kotze’s resignation through to the appointment of Mr. Chris G.B. Meyer. On May 1, 2021, Mr. Lincoln Mali joined us as CEO of Net1 Southern Africa, a new position within our organization. On March 15, 2021, Mr. Nunthakumarin Pillay resigned his position as Managing Director: Southern Africa after 21 years of service to our company in order to pursue other opportunities. Mr. N. Pillay’s last day of employment was April 30, 2021. We have reorganized certain of our internal business reporting lines following the resignation of Mr. N. Pillay, which did not impact our business or processes significantly.”
- “Additionally, our reputation in South Africa has been tarnished as a result of public accusations, which accusations we have publicly denied and believe have no merit, against us for illegally providing our services and defrauding social welfare grant recipients. We have attempted to refute these allegations and have appointed a public relations firm to assist us in communicating effectively to the public and our stakeholders that our business practices comply with South African law and are fair to the social welfare grant recipients who purchase the financial services products that we offer.”
Acquisitions from our 8-KsELECTRONIC ARTS INC (EA) On September 20, 2021, EA completed their acquisition of Playdemic Limited.
MOODY’S CORP DE (MCO) On September 15, 2021, Moody’s acquired RMS Risk Management Solutions India.
PHILIP MORRIS INTERNATIONAL INC (PM) Philip Morris acquired Fertin Pharma (through their parent company Claudio Holdco), a company specializing in oral and intra-oral delivery systems.
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