Brompton Equity Split Corp.
TSX : BE.PR.A
TSX : BE

Brompton Equity Split Corp.
Dividend Growth Split Corp.
TSX : DGS
TSX : DGS.PR.A

Dividend Growth Split Corp.

March 14, 2011 08:21 ET

Brompton Equity Split Corp. and Dividend Growth Split Corp. Propose Merger

TORONTO, ONTARIO--(Marketwire - March 14, 2011) - 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.

Contact Information

  • Brompton Funds Management Limited
    Chris Cullen
    Senior Vice President
    (416) 642-9064
    www.bromptonfunds.com