ARC Issues 4.47M Shares to Acquire $2.15M ausbiz Notes with 10% Interest
ARC Funds Limited has strategically acquired $2.15 million face value of convertible notes in ausbiz TV at just 20% of their value, issuing 4.47 million new shares as consideration. This move aligns with ARC’s growth strategy to diversify income streams and deepen its investment platform.
- Acquisition of $2.15 million ausbiz TV convertible notes at 20% face value
- Consideration paid via 4.47 million new ARC shares at 10.5 cents each
- Convertible notes carry 10% annual interest, maturing in October 2028
- Option to convert notes into Ausbiz Group shares at independent valuation
- Investment expected to add $215k annual income to ARC
Strategic Acquisition at a Steep Discount
ARC Funds Limited (ASX – ARC) has made a notable strategic investment by acquiring $2.15 million face value of convertible notes in ausbiz TV Pty Ltd for just $430,000, representing 20% of the notes’ face value. This acquisition was settled through the issuance of approximately 4.47 million new ARC shares at 10.5 cents each to the existing note holders, marking a significant share placement under Listing Rule 7.1.
The convertible notes carry a 10% annual interest rate, payable quarterly, and mature in October 2028. ARC also agreed to convert $78,155 of accrued interest into shares and a new loan agreement, further cementing its financial commitment to the ausbiz Group.
Aligning with Growth and Diversification Objectives
This investment fits squarely within ARC’s broader strategy to diversify its portfolio across multiple asset classes and enhance its income streams. ARC projects that the ausbiz investment will generate an additional $215,000 in annual income, contributing positively to its earnings profile.
ARC’s existing portfolio includes stakes in Ausbiz Capital, Merewether Capital, and The Term Deposit Shop, and the addition of ausbiz Group is a natural extension of its focus on innovative, growth-oriented businesses. The collaboration between ARC and ausbiz is expected to unlock synergies, including integrating ausbiz’s financial content and educational offerings into ARC’s Term Deposit Investor Platform, aiming to boost efficiency and profitability.
Convertible Notes and Future Equity Upside
The convertible notes provide ARC with the option to convert its holdings into shares of Ausbiz Group at any time before maturity, with the conversion price to be set by an independent valuation. This feature offers ARC potential upside exposure to the growth of ausbiz Group beyond the fixed interest income.
Should ARC choose not to convert, the notes are redeemable for their full face value at maturity, providing downside protection. Additionally, ARC has secured its investment through a general security deed over Ausbiz Group’s obligations, mitigating credit risk.
Market Implications and Shareholder Considerations
While the acquisition price represents a steep discount to face value, the issuance of over 4.4 million new shares will dilute existing shareholders. The market will be watching closely how this dilution balances against the anticipated income and strategic benefits from the ausbiz investment.
ARC’s move into financial media and content delivery via ausbiz TV also signals a diversification beyond traditional investment management, potentially opening new avenues for growth and investor engagement.
Bottom Line?
ARC’s discounted acquisition of ausbiz convertible notes sets the stage for income growth and strategic expansion, but investors will watch closely for conversion decisions and dilution impact.
Questions in the middle?
- What valuation will be assigned to Ausbiz Group shares at the time of note conversion?
- How will ARC integrate ausbiz content into its existing platforms to drive growth?
- What impact will the share issuance have on ARC’s stock price and shareholder value?