Focus Impact Acquisition Corp. (NASDAQ: FIAC) has entered into a definitive agreement to combine with carbon streaming company DevvStream Holdings Inc. (OTC: DSTRF) at an enterprise value of approximately $212.8 million, or 4.7x 2025 EBITDA.

Vancouver, British Columbia-based DevvStream is a technology-based sustainability company that advances the development and monetization of environmental assets, with an initial focus on carbon markets.

Once the deal is completed, DevvStream is expected to delist from the Cboe Canada stock exchange and the combined company will trade on the Nasdaq under the ticker symbol “DEVS”.

Transaction overview

Focus Impact has about $60 million in its trust account after seeing 75.21% redemptions in April, and has not yet supplemented this with additional capital. But, its investor presentation does note that it plans on raising a $33 million PIPE.

DevvStream expects to add $40 million to its balance sheet while paying $15 million in deal expenses. The deal does not feature a minimum cash closing condition.

Pursuant to the transaction, Focus Impact will re-domicile in the Province of Alberta, Canada and a newly formed subsidiary will combine with DevvStream. The aggregate transaction consideration deliverable to DevvStream stockholders will be a number of newly issued shares equal to $145 million plus the aggregate exercise price of the outstanding options and warrants, with each share of common stock valued at $10.20 per share. Based on the aggregate transaction consideration, assuming full dilution and a U.S. dollar to Canadian dollar exchange rate of 1.34, this implies a deemed per share value of C$2.16 for DevvStream’s subordinate voting shares.

DevvStream shareholders are expected to own 57.8% of the combined company while the SPAC’s sponsor anticipates a 14% stake and the PIPE investors are to own 13.2%. Focus Impact’s shareholders expect to hold 8% of the combined company and transferred sponsor shares 7%.

FIAC sponsor’s agreed to give up 10% of its SPAC Class B Shares when the continuance is completed. In addition, with FIAC sponsor’s permission, it may also give up to 30% of its SPAC Class B Shares and/or warrants for financing or non-redemption agreements.

Both the company and the sponsor’s shares will be subject to a lockup for one year from the closing date or if the share price equals or exceeds $12.00 for 20/30 trading days at least 150 days after the closing.

Quick Takes: DevvStream works within the rapidly expanding carbon credit market by co-developing high-quality credits from decarbonization projects. This contribution assists global corporations and governments in achieving their net-zero objectives.

Established in 2021, the company stands as a carbon streaming enterprise dedicated to technology-driven decarbonization solutions that propel the growth and economic exploitation of environmental assets.

Its business includes two distinct programs, carbon investment and management, focused on the development and monetization of carbon credits by partnering with project developers to invest in, and facilitate the process of scoping, registering, validating, and monitoring projects in order to generate those carbon credits.

For now, the company has chosen to focus on repeatable and scalable technology-based projects for corporations and governments. With DevvStream acting as the project manager controlling all major aspects of its investment and management programs, the company believes that these projects will provide low-risk, long-term, and recurring revenue streams. But, it is still a pre-revenue company and it has yet to be proven just how well these projects will hold up.

The projects in its carbon investment profiles are expected to generate an approximate two-year payback period, with average capital investments ranging from $500,000 to $2.5 million. The company can then retain up to 100% of the carbon credit stream generated by the project.

For its carbon management program, DevvStream retains just 25 – 50% of the carbon credit stream generated and is required to pay for the project design document and certification costs. Projects from the management profile are expected to make up all of 2025E projections.

And, similar to many other businesses across multiple sectors, DevvStream has also decided to integrate its own blockchain technology, dubbed Devvio’s DevvX, into its operations. This platform will provide complete data provenance, delivering a level of trust and visibility unmatched by any other carbon credit developer, investor, or registry. DevvX stands as the most environmentally friendly blockchain globally, consuming a mere fraction of the energy per transaction compared to Bitcoin, with a reduction of one million times in energy usage.

The company believes that this first-of-its-kind platform, paired with its accurate quantification, predictability, and quick timing, gives it an advantage in the carbon credit market.

In 2022, the worldwide carbon market reached a staggering value of nearly $1 trillion, with the compliance market taking the lead. This compliance-based carbon market has a history of premium pricing and notable stability, primarily due to its well-established and uniform regulatory framework. These traits contribute to higher reliability, predictability, and overall transparency, supporting the company’s operations.

Although DevvStream expects most of its forecasted revenue to come from compliance, it also sees the voluntary carbon market as a substantial opportunity and intends to engage in both markets. Recent estimates suggest that the voluntary carbon market could reach as much as $250 billion by 2030.

DevvStream currently has a total pipeline representing an opportunity to generate over 30 million credits per year, totaling $450 million per year, across 140 projects. These projects mainly focus on emission reduction, energy efficiency, and renewable energy.

DevvStream comes at a steep discount compared to its counterparts in both the cleantech and renewables sectors, as well as in the yield and streaming industries. Focus Impact’s valuation of DevvStream is set at 4.7x its projected 2025 EBITDA of $45.1 million. This valuation stands in stark contrast to its peers, with yield and streaming company Altius Minerals (OTCMKTS:ATUSF) valued at 19.2x EBITDA and cleantech player NextEra Energy (NYSE:NEE) valued at 14.3x EBITDA.

However, the company does represent a premium to Canadian Solar (NASDAQ: CSIQ) and Inspired Plc (LON:INSE), at 3.1x and 4.2x 2025 EBITDA, respectively.

DevvStream currently has a negative EBITDA of $3.3 million due to corporate expenses, but anticipates it’ll be in the green with $6.7 million by next year. As DevvStream continues to advance its current pipeline of contracted projects and over 140 identified projects, the company’s management team expects to see substantial upside to this forecast.

In terms of revenue, DevvStream is valued at 3.9x, lower than its cleantech & renewables and yield & streaming peers that expect to trade at a median of 5.3x and 9.4x in 2025, respectively. On the higher end, Altius Minerals is valued at 12.5x 2025 revenue and Brookfield Renewable (NYSE:BEP) is valued at 11.8x. But, DevvStream still comes at a premium compared to Canadian Solar and Inspired Plc, valued at 0.4x, and 0.9x 2025 revenue, respectively.

While DevvStream has yet to generate any revenue, it anticipates achieving $13 million in 2024 with ambitious plans to quadruple this figure, aiming for a net revenue of $55.1 million in 2025. DevvStream anticipates that a significant portion of its projected revenue will be derived from compliance-based credits, given the stable and established nature of that particular market. Nonetheless, the swiftly expanding voluntary carbon market could also present a substantial opportunity of growth and diversification for the company.

For the full investor presentation, click here.

ADVISORS

• Company
  • Morrison & Foerster LLP and McMillan LLP served as legal counsel.
• SPAC
  • Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC (“CCM”), served as exclusive financial advisor, lead capital markets advisor and placement agent.
  • Kirkland & Ellis LLP and Stikeman Elliott LLP served as legal counsel.