By Manya Saini and Niket Nishant
(Reuters) -B. Riley Financial said on Friday that co-founder and co-CEO Bryant Riley had offered to buy the bank, in what has been a torrid week for the firm following its warning of a hit from its investment in Vitamin Shoppe-owner Franchise Group (NASDAQ:FRG).
Riley's unsolicited offer of $7 per share values the investment bank at $212 million and reflects a 39% premium to the stock's last close on Thursday.
The bid, however, is a far cry from the stock's nearly $17 price just last week, before the Los Angeles, California-based bank was gripped by the turmoil following its warning earlier this week that saw the bulk of its value evaporate.
The bank had a market value of more than $1 billion at its peak this year. Its shares closed up 16% on Friday, after having lost nearly 70%, or about $360 million, this week. Riley owns a 24% stake in the company.
CONDITIONAL OFFER
A special committee of independent board directors will review the offer. Riley said he would not proceed unless he got the committee's nod.
"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," the co-founder said in a letter on Friday.
The bank will continue to report financials to the Securities and Exchange Commission, and its bonds and preferred shares will remain publicly traded.
"Although Bryant Riley's offer seems like a vote of confidence, he may already be so over-leveraged that there may be doubts as to if he can pull together the financing and whether the board would even approve it," said Running Point Capital's Chief Investment Officer Michael Ashley Schulman.
Riley has said financing would not be a problem. The deal will be financed with debt and potentially equity from third-party capital providers "with whom I have deep and long-standing relationships," he said in a filing.
B. Riley had participated in the management-led buyout of Franchise last year. Its dealings with Franchise's former CEO, Brian Kahn, came under review after Bloomberg News reported that he was a co-conspirator in a securities fraud involving Prophecy Asset Management.
Kahn has denied the allegation, saying he never knew that Prophecy was allegedly defrauding investors.
An external investigation and an internal review earlier this year cleared B. Riley of any wrongdoing.