Diversified United Investment (ASX:DUI) has entered into a formal implementation deed to merge with Australian United Investment (ASX:AUI), creating a simplified investment powerhouse with a projected market capitalisation of $2.5 billion.
The merger, to be executed via a scheme of arrangement, aims to consolidate two highly complementary portfolios to achieve greater scale and significantly lower operating costs.
Under the proposed terms, DUI shareholders will receive newly issued AUI shares based on the relative pre-tax net tangible assets of both firms.
Based on recent filings, the indicative exchange ratio is approximately 0.4815 AUI shares for every DUI share.
A major highlight of the deal is a projected 37.5% increase in annual dividends for DUI shareholders.
The AUI board intends to maintain its 37-cent annual dividend and introduce a special fully franked dividend of 8 cents per share for the next four years, potentially raising DUI’s effective annual yield from 16 cents to 22 cents per share.
The merger has received the unanimous recommendation of DUI's independent board committee and the strong backing of The Ian Potter Foundation, the largest shareholder in both entities.
Beyond dividend growth, the consolidation is expected to slash annual administrative expenses by approximately 21% ($700,000).