B. Riley Financial partners with Oaktree in $386 million deal

LOS ANGELES - B. Riley Financial, Inc. (NASDAQ:RILY) has entered into a definitive agreement with investment firm Oaktree Capital Management, L.P. to form a strategic partnership involving its Great American Group businesses. The deal, which is expected to close in the fourth quarter of 2024, will result in the creation of a new holding company named Great American Holdings, LLC.

Under the terms of the agreement, B. Riley will reorganize internally before contributing its Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions, and Real Estate Advisory businesses to the newly formed company. In return, B. Riley will receive approximately $203 million in cash, Class B Preferred Units, and a 47% stake in the common units of Great American NewCo. Oaktree will acquire a 53% stake and Class A Preferred Units for a cash consideration of about $203 million, implying a total enterprise value of $386 million.

Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley, expressed enthusiasm for the partnership with Oaktree, citing its reputation and track record in asset management. He anticipates the alliance will enhance client services and contribute to B. Riley's plan to reduce debt while investing in core financial services.

Oaktree representatives Nick Basso and Thomas Casarella conveyed their eagerness to contribute capital and operational expertise to support the growth of Great American Group. They look forward to working with B. Riley and the leadership team to foster the company's development as an independent platform.

The transaction has received approval from B. Riley's Board of Directors and awaits regulatory approvals and other customary closing conditions. Moelis (NYSE:MC) & Company LLC and Sullivan & Cromwell LLP served as advisors to B. Riley, while Wachtell, Lipton, Rosen & Katz advised Oaktree.

This partnership announcement follows an earlier statement by B. Riley about exploring strategic alternatives for the Great American Group businesses. The information in this article is based on a press release statement from B. Riley Financial.

In other recent news, B. Riley Financial, Inc. has been undergoing significant financial and leadership changes. The company has made amendments to its credit facilities, which include an increase in interest rates and a repayment of approximately $85.9 million of its term loans. Alongside this, B. Riley Financial has announced the departure of Kenny Young from his executive roles within the company.

In a bid to streamline operations and financial obligations, B. Riley Financial is planning to sell a majority stake in its Great American Group and is also restructuring its debt. The company's founder, chairman, and co-CEO, Bryant Riley, has proposed a buyout to take the company private.

B. Riley Securities, a subsidiary of B. Riley Financial, has appointed Brendon Philipps as Managing Director to lead their Capital Structure Advisory and Liability Management efforts. This comes amidst an estimated net loss between $435 million to $475 million for the second quarter of 2024, attributed to non-cash impairment charges and write-downs. Despite this, B. Riley maintained an operating adjusted EBITDA between $50 million to $55 million.

These are some of the recent developments that have been shaping the trajectory of B. Riley Financial, Inc. As the company navigates these changes, investors and stakeholders are keeping a close watch on the unfolding developments.

InvestingPro Insights

As B. Riley Financial (NASDAQ:RILY) embarks on this strategic partnership with Oaktree Capital Management, investors should consider some key financial metrics and insights from InvestingPro.

According to InvestingPro data, B. Riley's market capitalization stands at $133 million, reflecting the company's current valuation. The company's revenue for the last twelve months as of Q1 2024 was $1.22 billion, with a revenue growth of 19.73% over the same period. This growth suggests that despite recent challenges, the company has been able to expand its top line.

However, it's important to note that B. Riley has faced some financial headwinds. The company was not profitable over the last twelve months, with a negative gross profit margin of -1.24% and an operating income margin of -4.05%. These figures align with an InvestingPro Tip indicating that B. Riley suffers from weak gross profit margins.

On a more positive note, another InvestingPro Tip highlights that B. Riley pays a significant dividend to shareholders. In fact, the company's dividend yield stands at an impressive 45.56%, although it's worth mentioning that there has been a 50% dividend growth decline in the last twelve months.

The stock's performance has been challenging, with a one-year price total return of -88% and a three-month return of -75.65%. This aligns with several InvestingPro Tips noting that the stock has fared poorly over various time frames.

For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for B. Riley Financial, providing a deeper understanding of the company's financial health and market position.

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