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HomeValue InvestingALJ Regional Holdings: Partial Liquidation Beneath Proforma NCAV

ALJ Regional Holdings: Partial Liquidation Beneath Proforma NCAV

ALJ Regional Holdings (ALJJ) is probably going a well-recognized title to many readers (and thanks to those who pointed it out to me), it was an NOL shell that Jess Ravish (former Drexel, Jefferies and TCW govt) used as a holding firm to purchase and promote a number of varied unrelated companies during the last 10-15 years to absorb the tax belongings. The overwhelming majority of the NOLs expire in 2022.  It has functioned as Ravich’s mini-PE fund, he owns ~47% of the inventory (administration owns 56% as a gaggle).  As of 9/30/21, ALJ had two working companies: 1) Faneuil, a enterprise processing outsource supplier and; 2) Phoenix Shade, a specialty e-book printer that manufactures schooling supplies, closely illustrated books, and so forth.

Probably because of the upcoming NOL expiration, ALJ has made two vital asset gross sales within the final two months:

  • On 12/21/21, ALJ offered a massive piece of the Faneuil enterprise to TTEC Holdings (publicly traded as TTEC) for $140MM money ($15MM of which might be escrowed) and a $25MM-earn out.  The remaining items of Faneuil are anticipated to generate normalized income of $80-$90MM.  The sale is predicted to shut in Q1, and TTEC will get a 3-year possibility to purchase the remaining enterprise.  The transaction is structured as an asset sale, so ALJ will obtain all of the economics of the enterprise efficiency up till the cut-off date.
  • On 2/4/22, ALJ offered the complete Phoenix Shade enterprise to Lakeside E book Firm (subsidiary of LSC Communications, the catastrophe spin from RRD) for $135MM money.  The sale is predicted to shut in Q2.

Following the closing of each of those transactions, I estimate ALJ may have roughly $150MM in web present asset worth plus the remaining enterprise at Faneuil, versus a present market cap (together with the conversion of converts and warrants) of $136MM:

The primary purpose the inventory is reasonable is Jess Ravich, the market would not belief him, one good instance is he participated in a financing spherical throughout covid and acquired convertible debt at a $0.54 conversion worth that PIKed for a yr (additional diluting minority shareholders) earlier than it was amended.   One other is he is additionally been going through authorized hassle over the previous couple of years concerning his time at TCW.  Now that the NOLs are burned off and/or expiring, perhaps he not desires to cope with public shareholders and makes use of the money proceeds to take out the minority shareholders.  There’s precedent, he did a big money tender again in 2012 following the sale of a enterprise, the Alpha Vulture weblog lined it effectively again then.

Full disclosure, my price foundation is nearer to $2.10, the inventory ran up final week and I did not have time to jot down it up however nonetheless assume the shares are fairly low cost.

Disclosure: I personal shares of ALJJ



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