Shares of B Riley Financial (RILY) soared in trading on Monday after the financial services company announced that it will sell a majority stake in its Great American Holdings business to funds managed by Oaktree Capital Management. RILY will receive around $203 million in cash and retain 47% of the common units in a reorganized Great American Co.
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RILY Will Receive Preferred Units as Part of This Deal
Additionally, B Riley will receive preferred units initially valued at $183 million. Meanwhile, Oaktree, known for investing in distressed companies, will own a 53% common stake in Great American. Great American Co. is a company specializing in appraisals, valuations, and liquidations.
This deal implies a total enterprise value for the Great American NewCo of $386 million and is expected to close in the fourth quarter of this year.
Why Has RILY Sold Its Stake in Great American Co?
This transaction is a strategic move by B Riley to strengthen its balance sheet, as the company faces rising debt of $2 billion as of its midyear. In fact, to prioritize debt reduction, the company suspended its dividend in August and recently renegotiated key loan agreements, which involved paying down the balance and terminating a revolving credit line.
B Riley’s CEO, Bryant Riley, commented on the deal, “This transaction is an important step in our plan to reduce our debt while reinvesting in our core financial services businesses. We are very excited about this new partnership we established with Oaktree in the Great American Group as it will enable meaningful debt reduction while retaining significant equity upside in the business with a highly capable new partner that will increase its future growth prospects.”
Is RILY Stock a Good Buy?
None of the Wall Street analysts have covered RILY stock over the past three months. Furthermore, over the past year, RILY has plunged by more than 85%.
