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Deep-tech investment fund Powerhouse Ventures (ASX: PVL) is seeking to acquire fellow Brisbane company Aliwa Funds Management in a shake-up of operations that aims to expand its horizons by broadening its investment capability.
Powerhouse, which invests in emerging intellectual property focused on decarbonisation, next generation computing, space technologies and healthcare, has revealed plans for a scrip-based buyout of Aliwa Funds valued at up to $1.37 million.
Aiwa Funds, which counts Powerhouse non-executive director David McNamee as its sole director, is described as “one of the few professional institutional investors in the micro and nano cap landscape”.
As it is a related-party transaction, Powerhouse Ventures will seek shareholder approval for the deal which the company says will deliver a base from which to grow a funds management division.
The value of Powerhouse Ventures’ current portfolio grew 12 per cent to $8.55 million in FY24, with the company counting the likes of Quantum Brilliance, Ferronova and Skycraft in its portfolio.
Powerhouse Ventures, which posted a net profit of $405,079 in FY23, says the acquisition is part of a broader strategy to provide the company with a “clear and commercially viable pathway forward to immediate and longer-term shareholder value beyond the confines of its current balance sheet”.
The all-scrip acquisition of Aiwa Funds will initially equate to 15 per cent of Powerhouse Ventures’ shares on issues, with an additional performance fee potentially taking this higher.
The deal will comprise $500,000 upfront with shares issued at 4c each, followed by a further $224,000 in scrip at 4c per share as an earn-out on the proviso that there is more than $20 million in funds under management retention over 18 months.
The final earnout, which is capped at $650,000, has been agreed as a fixed 65 per cent share of any paid performance fees to the end of FY26.
Powerhouse Ventures has outlined several key benefits it sees emerging from the transaction, including an opportunity to “utilise fund vehicles for investment activity with an incentivised team and additional track record and commercial structures to raise new capital”.
The deal is also expected to provide an improved diversification and liquidity profile for the company compared to its “current static asset book”, while better leveraging its ability to “capitalise on the risk-reward opportunity set presenting itself right now in micro-cap stocks and risk asset landscape”.
Powerhouse Ventures is equally hopeful of narrowing the discount at which its shares are trading on the ASX compared to its current net tangible asset backing of 9.2c per share.
Shares in Powerhouse Ventures were trading at 5.3c at 11.41am (AEST).
Should the acquisition be approved by shareholders, McNamee will become the chief investment officer and portfolio manager of Powerhouse Ventures.
The company plans to seek shareholder approval for the acquisition at the upcoming annual general meeting.
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