Dipula Income Fund Ltd. agreed to internalize its management by acquiring a 100% beneficial interest in Dipula Asset Management Trust from the beneficiaries for an aggregate purchase consideration of 142 million South African rand.
The move is in practical effect from Sept. 1.
Of the consideration price, 65%, or 92.3 million rand, will be via the allotment and issue of Dipula B ordinary shares, and the remaining 35%, or 49.7 million rand, will be paid in cash. The cash consideration will be funded through cash resources and/or debt facilities.
The company expects roughly 15 million rand in annual savings as a result of the internalization.
Mazars South Africa, the independent expert appointed by the company, is in the process of finalizing an opinion on the fairness of the internalization to Dipula shareholders.
The move is subject to Dipula shareholders approving the issue of shares to the vendors; the execution of formal employment contracts between all management staff identified by Dipula as being required for the internalization; and both Izak Petersen, Dipula CEO, and Ridwaan Asmal, financial director, concluding formal employment contracts with the company with a minimum employment period of two years.
The consideration shares to be received by the vendors will have to be opted to be placed under a restriction on trading for two years, and those not elected for the lock-in period will be required to be subject to placement in a pool administered by a broker nominated by the company's board that will sell the shares on instruction from the vendors under a mandate that restricts selling the shares to competitors and a maximum discount of 5% to the 30-day volume weighted average price.
Management will be awarded a fully funded, once-off issue of Dipula B ordinary shares of 8 million rand as compensation for the contracted minimum employment period and the lock-in undertaking, with the management shares also subject to a two-year trading restriction.
As of Oct. 16, US$1 was equivalent to 13.28 South African rand.