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B. Riley Financial (NASDAQ:RILY) said it has entered into talks with a global asset manager to sell a majority stake in the Great American Group.
The proposed deal currently values the Great American Group business at a total enterprise value of ~$380 million.
The company also entered into a non-binding commitment for a debt financing of the B. Riley and bebe brands businesses, and if completed the deal is anticipated to generate ~$236 million of proceeds, which the company plans to use to pay down its senior secured debt.
The deals are expected to strengthen the embattled brokerage and investment firm’s balance sheet, and the company is anticipated to receive ~$410M of gross cash proceeds from the transactions.
In August, the firm’s lenders reportedly extended the deadline for the company to produce an overdue 10-Q financial statement filing.
The Great American Group business is currently carried on the company’s balance sheet at a book value of ~$35 million.
The firm said it intends to use the majority of proceeds from the two deals to reduce Nomura senior secured debt to ~$125M by the end of this year.
The company also expects to use cash on hand and proceeds from other asset sales to repay all 2025 maturities.
The firm’s chairman, co-CEO, co-founder, and largest shareholder, had offered to acquire the company at $7 per share in August. RILY said on Monday that it has established a special committee consisting of independent directors to evaluate the proposal and determine the appropriate course of action.
The firm had suspended its dividend in August after saying that it plans to take a $433M-$475M charge for losses from its investment in Franchise Group and a related receivable.
The U.S. Securities and Exchange Commission is investigating whether B. Riley (RILY) properly disclosed risks associated with some of its assets.
