HFA Holdings (HFA) has moved a step closer to finalising its merger with US-based group, Lighthouse Partners (Lighthouse).
The two groups entered into a merger implementation agreement (MIA) yesterday.
Under the terms of the MIA, the two groups will work towards executing a share purchase agreement (SPA) to effect a merger of the two businesses.
The MIA states that HFA will acquire Lighthouse for US$348.5 million in cash and 134.67 million HFA shares.
Based on HFA's current share price, the acquisition price is about A$707 million, representing approximately 11 times Lighthouse's estimated financial year 2008 EBITDA (earnings before interest, taxes, depreciation and amortization).
On completion of the merger, HFA and Lighthouse will have total assets under management of about US$8 billion.
It will have offices in Sydney, Melbourne, Brisbane, New York, Chicago, Palm Beach Gardens, London and Hong Kong.
Lighthouse's current investment team will continue to actively manage all of the Lighthouse Funds. No changes are proposed in relation to the investment strategy or structure of any of the funds in connection with this merger.
As a condition to the merger, certain key Lighthouse executives are expected to enter into new employment contracts to ensure their continued services to the funds.
The cash component of the merger consideration will be funded through a combination of equity and debt.
The equity raising is expected to be undertaken primarily through a pro rata entitlement offer to existing shareholders.
Two of HFA's largest shareholders, MFS Alternative Assets Limited (MFS AAL) with 19.4 per cent shareholding and the Spencer Young Family Trust with 12.57 per cent shareholding, have both indicated that they are supportive of the proposed merger.
MFS AAL has also expressed an intention to take up its entitlement in full in the equity raising.
A subsequent announcement regarding the merger and equity raising is expected to be made next month.
