Australian United Investment Company (ASX:AUI) entered into an implementation deed for a proposed merger with Diversified United Investment (ASX:DUI) via a scheme of arrangement, under which Australian United will acquire all of the shares of Diversified United it does not own in exchange for the issue of Australian United shares to the shareholders of Diversified United, according to a Friday Australian bourse filing.

Australian United currently owns a 6.8% stake in Diversified United. A shareholder meeting for Australian United shareholders and a scheme meeting for Diversified United shareholders to vote on the scheme of arrangement are both expected to be held in April. The scheme is also conditional upon approval from the Federal Court of Australia.

The Directors of Australian United expect to maintain the current annual fully franked dividend of AU$0.37 per share post-merger and for each of the next four years to pay a special fully franked dividend of AU$0.08 per share, in the absence of unforeseen circumstances.

The scrip consideration to be paid by Australian United for each Diversified United share under the scheme of arrangement will be determined based on the pre-tax net tangible assets of Diversified United per share divided by the pre-tax net tangible assets of Australian United per share on a date that will be five business days before the meeting for the proposed scheme. Based on the most recent data as of Friday, Diversified United shareholders would receive around 0.4815 Australian United shares for each Diversified United share under the scheme of arrangement.

Diversified United's independent board committee unanimously recommended that its shareholders vote in favour of the scheme in the absence of a superior proposal, and subject to an independent expert concluding that the scheme is in the best interests of its shareholders.

Australian United entered into a call option agreement with The Ian Potter Foundation for the right to acquire up to nearly 28 million Diversified United shares, representing a 13.1% stake held by the foundation in exchange for newly issued Australian United shares. The call option is exercisable if a competing proposal is announced or received in respect of Diversified United, per the filing.

Diversified United's shares rose over 2% in early trading on Friday.