DUI and AUI Set to Merge, Promising 37.5% Dividend Boost and $700K Cost Savings

Merger Overview

Diversified United Investment Limited (ASX – DUI) and Australian United Investment Company Limited (ASX – AUI) have entered into an implementation deed to merge via a scheme of arrangement. Under this arrangement, AUI will acquire all DUI shares it does not currently own, issuing new AUI shares to DUI shareholders in exchange. This consolidation is projected to create a significantly larger investment company with a market capitalisation of approximately $2.5 billion based on current share prices.

Share Exchange and Valuation

The exchange ratio for DUI shareholders will be determined by the relative pre-tax net tangible asset (NTA) values of both companies five business days before the scheme meeting. Based on the latest NTAs announced on 23 January 2026, DUI shareholders would receive roughly 0.4815 AUI shares for each DUI share held. This ratio is subject to adjustment depending on changes in the companies’ NTAs leading up to the meeting.

Dividend and Cost Benefits

The merger is expected to deliver materially higher dividends to DUI shareholders. AUI has committed to maintaining its current fully franked dividend of 37 cents per share and to pay a special fully franked dividend of 8 cents per share annually for the next four years. For DUI shareholders who convert their holdings into AUI shares, this translates to an approximate 37.5% increase in annual fully franked dividends, from 16 cents to about 22 cents per existing DUI share over the same period.

Additionally, the merger anticipates annual cost savings of around $700,000, or 21%, primarily from reductions in directors’ fees, listing fees, insurance, and other operational expenses. These efficiencies are expected to support a narrower discount to pre-tax NTA in the merged entity’s share price.

Strategic and Shareholder Support

The merger brings together two investment companies with similar portfolios and investment philosophies, offering greater scale and flexibility in portfolio management. DUI’s Independent Board Committee (IBC) unanimously recommends the merger, contingent on an independent expert’s favourable opinion and the absence of a superior proposal.

The Ian Potter Foundation, a significant shareholder in both companies holding 16.79% of DUI shares and a major AUI shareholder, strongly supports the merger and intends to vote in favour. AUI has also secured a call option agreement with the Foundation to acquire additional DUI shares if necessary, reinforcing the transaction’s stability.

Conditions and Next Steps

The merger is subject to several conditions precedent, including approvals from DUI and AUI shareholders, Federal Court approval, and the absence of any material adverse events affecting either company. Both companies have agreed to exclusivity provisions and break fees to secure the transaction.

DUI plans to dispatch a scheme booklet and an independent expert’s report to shareholders in March 2026, with a shareholder vote expected in April. The scheme’s implementation is targeted for late April 2026, pending all approvals and conditions being met. Meanwhile, DUI’s interim dividend timetable remains unchanged.