DomaCom Ltd (ASX:DCL) has started the final legal and financial due diligence phase for the prospective acquisition of AustAgri Group Limited (AAGL) by a DomaCom sub-fund.
In September 2020, DomaCom announced that it had entered a conditional implementation agreement for the DomaCom Fund to acquire AAGL.
Under this agreement (if completed), a newly established DomaCom sub-fund to be managed by DomaCom would acquire 100% of the issued shares in AustAgri by way of a scheme of arrangement undertaken by AAGL.
Once completed, the AAGL transaction is expected to deliver at least $13 million in revenue over the five-year term of the sub-fund which equates to adding $300 million to DomaCom’s FUM.
Settlement of the first AAGL acquisition, Cedar Meats Pty Ltd, is in the final stages and is expected to complete in the next few weeks.
Final stages of transaction
Chief executive officer Arthur Naoumidis said: “I am pleased that we are in the final stages of a transaction that is expected to deliver at least $13 million in revenue over a five-year term.
“Although there have been significant delays due to the complex nature of this transaction, we are now making progress.
“The completion of this transformative deal will put us in a position of strength from which we can move forward with other exciting initiatives such as our Affordable Housing, Downsizer and Islamic Equity Mortgage products.”
Shares have been as much as 11% higher to 9.4 cents.
Earlier this week Namoudis presented at Proactive's Revenue Webinar.
Due diligence to begin
As consideration for the acquisition of AAGL by the DomaCom sub-fund, AAGL shareholders will receive units in the DomaCom sub-fund as consideration for their shares to be acquired.
DomaCom will now begin the due diligence to ensure:
- Cedar Meats transaction can be completed and will be owned by AustAgri Group; and
- There is sufficient free cashflow after the acquisition to be able to pay DomaCom’s $2.6 million annual fee.
DomaCom will also prepare the Scheme of Arrangement that is required for the acquisition of AustAgri.