DomaCom Australia Ltd (ASX:DCL) has taken the long-awaited first important step towards completing the AustAgri transaction with AustAgri subsidiary Global Meat Export Pty Ltd (GME) finalising the acquisition of Cedar Meats Pty Ltd.
The company previously entered into a Revenue Recognition Agreement with AustAgri relating to a conditional proposal to onboard AustAgri into a DomaCom sub-fund on the DomaCom Platform by exchanging shares in AustAgri for units in the DomaCom sub-fund.
First key condition
Acquisition of Cedar Meats business assets and operations by GME represents fulfilment of the first key condition under this agreement and as a result, DomaCom has resumed its final legal and financial due diligence for the AustAgri transaction.
DomaCom CEO Arthur Naoumidis said: “Our planned on-boarding of AustAgri onto the DomaCom Platform has been a stop-start affair since we first announced it to the market more than 12 months ago. But at last real progress has been made, with the acquisition of Cedar Meats business assets and operations by GME.”
Resuming due diligence
"This means we can now again resume final legal and financial due diligence for this company-transforming transaction. If it completes, the AustAgri Transaction will provide a significant boost to DomaCom’s revenue base and its total funds under management,” he said.
GME management has advised DomaCom that the business will continue to trade as Cedar Meats Australia and it will be business as usual.
The business will remain family operated with Pierre and Tony Kairouz continuing to head up operations of GME and all current management and staff will remain and operations will continue as normal. Pierre and Tony Kairouz are expected to obtain a substantial ownership interest in AustAgri and is currently being negotiated.
Commercial terms
The main commercial terms of the AustAgri transaction include:
- A newly-established DomaCom sub-fund proposes to acquire at least 75% of the issued shares in AustAgri by entering into share/unit exchange agreements with AustAgri shareholders;
- Under the share/unit exchange agreements, as consideration for the acquisition of AustAgri shares by the DomaCom sub-fund, AustAgri shareholders will receive 1 unit in the DomaCom sub-fund for every 1 AustAgri share exchanged;
- DomaCom Ltd, will receive an annual management fee of 0.88%pa of the value of the DomaCom sub-fund with a minimum annual fee of $2.6 million plus GST for a minimum period of 5 years; and
- DomaCom will issue 100 million DomaCom shares to AustAgri shareholders (revenue recognition shares) in recognition of the minimum $13 million in contracted management fees over a five-year period to be delivered to DomaCom for management of the DomaCom subfund.
As a result of the completed acquisition of the Cedar Meats business assets and operations by GME, DomaCom has resumed its final legal and financial due diligence for the prospective transfer of at least 75% of the issued shares in AustAgri to a DomaCom sub-fund.
Shortfall raising
"As our AustAgri due diligence process recommences, we continue in our efforts to complete the shortfall raising, a precursor to DomaCom shares resuming trading on the ASX. Over the months ahead, we look forward to updating the market on further exciting developments leveraging off our unique fractional investment platform,” Naoumidis said.
Remaining conditions that must be fulfilled to allow completion of the transaction to proceed include:
- Satisfactory completion of legal and financial due diligence by DomaCom and AustAgri;
- AustAgri shareholder approval;
- DomaCom shareholder approval; and
- AustAgri refinancing its transaction loan facility with longer-term loan facility.
DomaCom has reiterated that no assurance can be given as to if or when the AustAgri transaction will complete.