LOS ANGELES — The company that backed Franchise Group’s management-led acquisition last year, and owner a subsidiary currently overseeing the going-out-of-business sales for a pair of Top 100 retailers, might soon be going private itself amid losses due to its involvement with FRG.
In a 13D amendment filed with the Securities & Exchange Commission filed Aug. 16, B. Riley Financial CEO Bryant Riley declared intent to take the financial services company private. In an Aug. 15 letter to shareholders that accompanied the amended filing, he said, “The current public company paradigm requires us to focus on short-term objectives and allocate unnecessary attention and time on constituencies who are not aligned with the owners of the business.”
In the letter, Riley proposed to acquire all the shares of common stock that he does not presently own for $7 per share, and he said that the transaction would be financed with debt and, potentially, equity from third-party capital providers with whom he has “deep and long-standing relationships.” In the letter, he said he owns about 24% of the company’s outstanding common stock. Reuters reports that Riley’s proposed purchase price would be $212 million.
However, the Reuters report notes that RILY was priced at nearly $17 a share the week before Bryant Riley’s proposal, and it fell sharply after the firm delayed its second quarter report on Aug. 13. In a statement, Bryant Riley said the second quarter results were negatively impacted by non-cash losses, most of which relate to the performance of its investment in Franchise Group and its Vintage Capital loan receivable.
On Aug. 12, B. Riley released preliminary second quarter financials, with a net loss for the three months ended June 30 expected to be in the range of $435 to $475 million, or $14 to $15 per diluted loss per share, with total cash and investments of approximately $1.1 billion and total outstanding debt of approximately $2.16 billion.
In a conference call that same day, Riley noted that he and the company had received subpoenas from the SEC primarily relating to the company’s dealings with former Franchise Group CEO Brian Kahn. The Motley Fool says B. Riley’s relationship with Franchise Group has made it a target for short sellers for some time.
In August 2023, B. Riley Financial participated in a management-led buyout of Franchise Group, which owns and operates Top 100 retailer American Freight as well as lease-to-own retailer Buddy’s Home Furnishings. It came under scrutiny earlier this year when Kahn’s previous dealings came into question. Those issues led to Kahn’s resignation. At the time, B Riley reportedly told Bloomberg that it was unaware of a probe but would cooperate if a situation occurred.
Additionally, B. Riley Retail Solutions, a subsidiary of B. Riley Financial, is managing the liquidation sales of bankrupt Top 100 retailers Conn’s HomePlus and Badcock Home Furniture &more. Badcock was bought in late 2021 by Franchise Group and was sold to Conn’s a few months after FRG went private.
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