South African investment companies Zarclear Holdings Ltd. and African Phoenix Investments Ltd. agreed in principle to carry out a series of transactions that will result in a full merger and entered an exclusivity period until April 30, 2020.

Under the deal, African Phoenix will acquire the entire share capital of Zarclear and the latter's shareholders will receive shares of African Phoenix in a ratio linked to the net asset value of the companies, subject to regulatory and shareholder approvals.

Zarclear shareholders that do not want to be part of the merger will have the option to sell their stake at a price of 4.40 South African rand per Zarclear share they own. The cash alternative price per share represents a 10.3% premium to the 30-day volume-weighted average traded price of Zarclear shares prior to the date of the announcement.

African Phoenix said it will issue more than 30% of its ordinary shares in issue to settle a portion of the scheme and convert its par value share capital structure into no par value shares. Additionally, it will repurchase shares worth approximately 599.3 million rand as a way to distribute surplus funds to ordinary shareholders.

African Phoenix will also acquire 100% of API Capital for a total consideration of nearly 54 million rand to facilitate its removal as a general partner of the fund. This will help it reduce the economic costs related to a general partner's removal. The acquisition is subject to relevant approvals from shareholders and boards of directors. The acquisition will be effective Dec. 31, the same date the payment is due to be made.

As of Dec. 2, US$1 was equivalent to 14.57 South African rand.