All of Bricknode's operational assets to be acquired by Huddlestock Fintech AS (OSE: HUDL)

The acquisition is a strategic move for both companies with Bricknode's investment operations software and technology combining with Huddlestock's trading technology and investment banking licence to create a leader in wealthtech solutions. Together with Huddlestock, Bricknode forms a strong group of companies with over SEK 80 million in annual revenue on a pro forma basis (based on FY2022 figures). The Transaction is expected to generate significant cost synergies and an accelerated revenue growth from both upselling opportunities amongst the combined customer base and an expanded target market with the complete end-to-end solution.
"Huddlestock's vision is to democratise the financial industry, and by including Bricknode in the Huddlestock Group, we can support digitalisation of the financial industry even better. The two companies complement each other perfectly with Huddlestock having strong trading technology, access to global markets and an investment banking licence, whereas Bricknode contributes proven back-office technology, operational services, front-end user interfaces along with a highly competent team," said John E. Skajem, CEO of Huddlestock.
"We are very excited to join forces with Huddlestock where our extensive product portfolio and domain knowledge will be put to use at great scale. In the 13 years Bricknode has been operating, we have invested over SEK 110 million in our technology and created an ecosystem of financial applications. All our software is cloud-native, which gives us unparalleled speed and scalability. Bricknode and Huddlestock have synergies and we are looking forward to working together in creating a unique European fintech company," said Stefan Willebrand, Founder and co-CEO of Bricknode.
"This announced transaction offers Bricknode an excellent opportunity to scale up its business. I am pleased for Bricknode shareholders being offered the chance to participate in this promising journey," said Robert Lempka, Chairman of Bricknode.
The Transaction in brief
The Transaction will be carried out through a sale of 100% of the shares in Bricknode Software AB, Bricknode Platform AB and Bricknode Ltd (collectively the "Subsidiaries") to Huddlestock for a total consideration of 41,138,911 shares in Huddlestock, provided that the Subsidiaries have a total net cash position of SEK 4 million as of 2023-04-01.
The Transaction is subject to approval of a general meeting in Bricknode. Shareholders in Bricknode representing approx. 68% of the shares and votes have committed to vote in favor of the approval of the Transaction at the extraordinary general meeting, which is expected to be held on 31 March 2023. Provided that the extraordinary general meeting resolves to approve the Transaction, it is expected to be completed during April 2023.
The consideration of 41,138,911 shares in Huddlestock corresponds to a value of the Subsidiaries of approx. NOK 106,961,169 (or approx. SEK 107 million based on a reference price of NOK 2.60 per share in Huddlestock and a NOK/SEK exchange rate of 1:1[2]).
The consideration shares will be issued in three separate and subsequent tranches in order for the Company not to hold more than 9.9% of the capital or votes in Huddlestock on each occasion, which would trigger a need for regulatory filings and approvals. The total number of consideration shares corresponds to approx. 21.3% of the total number of shares and votes in Huddlestock.
The issue of the first tranche of 19,000,000 consideration shares in Huddlestock will take place on completion of the Transaction ("Closing"), which is expected to occur in April 2023. The Company intends to use the consideration shares received, and/or the proceeds from the sale of such shares, to repay lenders and finance the operations of the Company. The current outstanding loans, including accrued interest, amount to approx. SEK 9.6 million and the Company intends to loan an additional SEK 5.3 million in order to capitalize the Subsidiaries and to fund the Company's operations. The operational costs of the Company amount to approx. SEK 60,000-80,000 per month. Consideration shares received in the first tranche which are not used for these purposes are intended to be distributed to the Company's shareholders during 2023. However, no resolutions to distribute consideration shares have been made and any future resolutions will have to be passed on separate general meetings to be held after Closing.
When the Company has transferred the consideration shares in Huddlestock received in the first tranche (e.g., through sales or distributions), the Company will request the issue of a second tranche of 19,000,000 additional consideration shares in Huddlestock, which will be delivered to the Company no later than three weeks after such request. It is the Company's intention that these consideration shares will be distributed to the shareholders of the Company, provided however that any such distribution will need to be resolved upon by a separate general meeting.
When the Company has transferred the consideration shares in Huddlestock received in the second tranche, the Company will request the issue of the final third tranche of 3,138,911 additional consideration shares in Huddlestock, which will be delivered no later than three weeks after such request. It is the Company's intention that these consideration shares will be distributed to the shareholders of the Company, provided however that any such distribution will need to be resolved upon by a separate general meeting.
The Company estimates that the consideration shares received in the second and third tranches can be distributed to the Company's shareholders no later than during the first half of 2024. The distributions are intended to be made through redemption offers to the Company's shareholders or similar distributions.
The current intention is to finally liquidate Bricknode once material assets are distributed to shareholders, which entails a delisting of the Company. The board may also assess the possibility to carry out a reversed takeover, whereby an unlisted company acquires Bricknode's listing at First North Growth Market.
Rationale of the Transaction
Bricknode has continuously evaluated various strategic and structural alternatives to drive growth and maximize shareholder value. In the year-end report for 2022, the Company communicated the large gap that exists between the scope and breadth of the product portfolio in relation to the size of the Company's revenues. In 2022, the Company launched an initiative to establish its own securities company in order to grow revenues and margins more quickly. In line with the fact that access to capital in the market has deteriorated and the personnel resources have been reduced during Q4 2022, the conditions for capitalizing and running its own securities company in the near term have also been reduced. In the Company's evaluation of strategic alternatives, it has therefore been important to find a party that shares the Company's vision and owns securities companies, which Huddlestock does.
Furthermore, Huddlestock has financial software in areas that Bricknode does not, such as real-time trading of equities. Bricknode's and Huddlestock's product portfolios complement each other effectively and together the companies have identified significant synergies and growth opportunities with a fast time to market.
The board of directors assesses that the Transaction enables continued expansion and increased use of the significant product portfolio that the Company has established and creates significant value for Bricknode's and Huddlestock's shareholders.
Due diligence
Before entering into the Agreement, Huddlestock performed a customary due diligence investigation (including financial, legal, commercial, technical and tax analysis) of the Subsidiaries. No information that has not previously been made public and that could constitute inside information in relation to Bricknode has been provided in the due diligence investigation. The Agreement contains customary guarantees and commitments from the Company regarding the Subsidiaries.
For more information regarding the Transaction, please refer to the information brochure regarding the Transaction which will be made available on Bricknode's website (www.bricknode.com) no later than on 17 March 2023.
Indicative timetable for the Transaction
+------------------------------------------+-----------------------------------+
|Extraordinary general meeting in Bricknode|Friday, 31 March 2023              |
+------------------------------------------+-----------------------------------+
|Closing of the Transaction and issue of   |During April 2023                  |
|the first tranche of consideration shares |                                   |
+------------------------------------------+-----------------------------------+
|Distribution of certain of the            |During 2023 (estimate)             |
|consideration shares in the first tranche |                                   |
|to the Company's shareholders             |                                   |
+------------------------------------------+-----------------------------------+
|Issues of the second and third tranches of|Finalised during H1 2024 (estimate)|
|consideration shares and distribution of  |                                   |
|such shares to the Company's shareholders |                                   |
+------------------------------------------+-----------------------------------+
Huddlestock in brief
Huddlestock is a provider of innovative technology and professional investor services. In 2022, the Huddlestock Group delivered consolidated revenues of NOK 46.1 million, +97% YoY, after including F5 IT since acquisition 1 May 2022. The EBITDA was NOK -14.0 million, as the group is scaling up the organization and continuing to invest in their technology suite, adding talent and preparing for growth in future client deliveries. Pro forma revenues for the full year of 2022 were NOK 61.6 million +48% YoY. Huddlestock's shares are listed on Euronext Growth Oslo.
Description of Bricknode and the Subsidiaries in brief
The Bricknode group was founded in 2010 with the purpose to help financial institutions, both established and startups, to digitalize businesses through automation and optimization of internal processes. The Subsidiaries have developed a scalable cloud-based platform for financial operations focused on investments and lending activities. The Subsidiaries offer its technology to customers through two types of services. The first is a pure Software as a Service and the other is a complete B2B Brokerage service.
Bricknode's shares are listed on First North Stockholm.
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[1]NOK 106,961,169, based on a reference price of NOK 2.60 per share in Huddlestock and a NOK/SEK exchange rate of 1:1.
[2]The closing rate on the spot market on 2023-03-14 has been used as exchange rate.