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(Updating actions in paragraph 3)
B. Riley RILY.O agreed Monday to sell its Great American unit, which helps companies determine the value of their assets, to investment firm Oaktree Capital in a $386 million deal that would reduce its debt and would strengthen its balance sheet.
The deal could ease investor concerns about the investment bank’s fortunes and allow it to tackle immediate challenges as it seeks to limit the fallout from its exposure to Franchise Group, owner of Vitamin Shoppe.
Shares of B. Riley jumped nearly 21% in early trading. The company will receive approximately $203 million in cash and preferred shares worth nearly $183 million in a new holding company for Great American, as well as a minority share of the holding company’s common shares.
“This transaction is an important step in our plan to reduce debt while reinvesting in our core financial services business,” said Bryant Riley, co-founder and co-CEO of B. Riley, which proposed taking the bank private. .
Retaining a stake in the company will also allow the bank to capitalize on its growth prospects.
Great American provides asset valuation and divestiture services to companies restructuring or exploring options.
The unit also includes real estate advisory services and other retail, wholesale and industrial solutions businesses. B. Riley went public about a decade ago following a merger with Great American.
Oaktree managed nearly $193 billion in assets as of June 30.
TURBULENCE SINCE AUGUST
B. Riley has faced increased turbulence since August, when it warned that its exposure to Franchise could lead to impairment and losses for the second quarter that ended June 30.
It also postponed the filing of its quarterly report with regulators, for the third time this year, due to a delay in finalizing the assessment of certain loans and investments.
The bank participated in the management buyout of Franchise last year. His relationship with former Franchise CEO Brian Kahn came under scrutiny after Bloomberg News reported that he was a co-conspirator in a securities fraud involving Prophecy Asset Management.
Mr. Kahn denied the allegation, saying he never knew Prophecy had allegedly defrauded investors.
An external investigation () and an internal review () conducted earlier this year also cleared B. Riley of any wrongdoing. But a stock market rout has wiped out 79% of the bank’s value so far in 2024.
