Brompton Equity Split Corp. and Dividend Growth Split Corp. Propose Merger
March 14 2011 - 8:20AM
Marketwired
Brompton Equity Split Corp. ("BE") (TSX: BE)(TSX: BE.PR.A) and
Dividend Growth Split Corp. ("DGS") (TSX: DGS)(TSX: DGS.PR.A)
(collectively the "Funds") will be holding shareholder meetings on
April 8, 2011 to consider and vote upon special resolutions to
merge BE and DGS by way of amalgamation (the "merger"). If the
merger is approved, the merged entity will be named Dividend Growth
Split Corp. and it will have the same investment objectives,
strategies and restrictions as DGS as well as substantially the
same preferred share and class A share attributes.
DGS invests on an equally weighted basis in a portfolio of 20
large capitalization Canadian equities that have among the highest
dividend growth rates on the TSX. As both the BE and DGS portfolios
are primarily invested in common shares of major Canadian issuers,
under the merger BE will be able to smoothly transition its assets
into a larger continuing fund with the ability to grow in size with
lower administrative costs and increased trading liquidity for
shareholders.
The proposed merger is expected to be beneficial to shareholders
of both BE and DGS for the following reasons:
-- Enhanced Liquidity: Following the merger, DGS is expected to have a
larger market capitalization and a greater number of shares outstanding
which is expected to enhance trading liquidity.
-- Enhanced Redemption Entitlement: DGS offers quarterly redemptions at net
asset value less costs, whereas BE only offers redemptions at net asset
value less costs on an annual basis. Shareholders of BE will also be
provided with an opportunity to redeem their shares on April 28, 2011
which is earlier than the scheduled final redemption date of BE of May
31, 2011, provided that BE shareholders tender their shares for
redemption by April 15, 2011 and the merger is approved by BE and DGS
shareholders.
-- Lower Management Expense Ratio: Shareholders will be provided with an
opportunity to invest in DGS which will have improved operational
efficiencies and enhanced economic viability. The merger will eliminate
duplicative administrative and regulatory costs of operating BE and DGS
as separate funds. In addition the merger is expected to reduce
operational costs on a per unit basis and correspondingly improve
returns by spreading fixed costs over a greater number of shares. Costs
of the merger (other than certain costs related solely to DGS) will be
borne by Brompton Funds Management Limited, the manager of BE and DGS,
and will be at no cost to shareholders.
-- Lower Management Fee: DGS offers a lower management fee of 0.60% of net
asset value per annum as compared to the current BE management fee of
1.00% of net asset value per annum.
Holders of preferred shares of BE will receive preferred shares
in DGS with an approximately three and a half year term and an
attractive 5.25% yield, while holders of class A shares of BE will
receive class A shares in DGS and benefit from a higher
distribution yield based on their relative net asset values. In
addition, preferred shares and class A shares of DGS have traded at
a combined premium to net asset value per unit of 9.2% from March
1, 2010 to February 28, 2011, while shares of BE have traded at a
discount to net asset value per unit over the same period.
The merger is expected to be implemented on a tax deferred basis
to shareholders of BE and DGS, subject to the assumptions and
qualifications outlined in the joint management information
circular.
Details regarding the proposed merger will be contained in the
joint management information circular which is expected to be
mailed to BE and DGS shareholders on or before March 18, 2011. The
circular will also be available on www.sedar.com and posted at
www.bromptonfunds.com. In addition to the approval of the BE and
DGS shareholders, the merger is subject to applicable regulatory
approvals. Under the merger proposal, each issued and outstanding
preferred share of BE will become one preferred share of DGS. Each
issued and outstanding class A share of BE will become the number
of class A shares of DGS determined by dividing the net asset value
per class A share of BE by the net asset value per class A share of
DGS, each calculated on April 28, 2011. In order to maintain the
same number of class A and preferred shares outstanding, class A
shares or preferred shares may be redeemed by BE on a pro-rata
basis prior to the merger as outlined in the joint management
information circular.
For additional information, please visit our website at
www.bromptonfunds.com.
Forward-Looking Statements
Certain statements contained in this news release constitute
forward-looking information within the meaning of Canadian
securities laws. Forward-looking information may relate to matters
disclosed in this press release and to other matters identified in
public filings relating to the Funds, to the future outlook of the
Funds and anticipated events or results and may include statements
regarding the future financial performance of the Funds. In some
cases, forward-looking information can be identified by terms such
as "may", "will", "should", "expect", "plan", "anticipate",
"believe", "intend", "estimate", "predict", "potential", "continue"
or other similar expressions concerning matters that are not
historical facts. Actual results may vary from such forward-looking
information for a variety of reasons, including those set forth
below.
Forward-looking statements in this press release include among
other things, the proposed timing of the merger and the expected
completion thereof; the expected benefits of the merger; the Funds
that are proposed to be merged. These statements are based on
certain factors and assumptions. In arriving at our conclusions
regarding the proposed timing of the merger, we have assumed that
shareholder approval will be obtained at the Meeting or adjournment
thereof, and that any regulatory approvals and third party consents
and actions are given or carried out (as the case may be) in a
timely manner. Our expectations regarding the benefits of the
merger are based on a single fund being more cost effective to
operate and a larger fund having greater trading volume and
liquidity. While we consider these assumptions to be reasonable
based on information currently available to us, they may prove to
be incorrect. There are no assurances that the actual outcomes will
match the forward-looking statements as a result of a number of
risks and uncertainties that could cause actual results to differ
materially from what we currently expect. These factors include
changes in market and competition, governmental or regulatory
developments and general economic conditions. Other than as
required under securities laws, we do not undertake to update this
information at any particular time.
Contacts: Brompton Funds Management Limited Chris Cullen Senior
Vice President (416) 642-9064 www.bromptonfunds.com
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