(Reuters) -B. Riley on Monday agreed to sell its Great American unit, which helps companies determine the value of their assets, to investment firm Oaktree Capital in a $386 million deal that would pare its debt and bolster the balance sheet.
The deal could allay investors' concerns over the investment bank's fortunes and allow it to tackle immediate challenges as it looks to contain the hit from its exposure to Vitamin Shoppe-owner Franchise Group (NASDAQ:FRG).
B. Riley shares jumped nearly 21% in early trading. The company will get about $203 million in cash and preferred units worth nearly $183 million in a new holding company for Great American, along with a minority share of common units in the holding company.
"This transaction is an important step in our plan to reduce our debt while reinvesting in our core financial services businesses," said B. Riley's co-founder and co-CEO Bryant Riley, who has offered to take the bank private.
Retaining a stake in the business will also allow the bank to capitalize on its future growth prospects.
Great American provides valuation appraisal and asset disposition services to companies that are restructuring or exploring options.
The unit also houses real estate advisory and some other retail, wholesale and industrial solutions businesses. B. Riley went public a decade ago via a merger with Great American.
Oaktree managed nearly $193 billion in assets, as of June 30.
TURBULENCE SINCE AUGUST
B. Riley has been navigating heightened turmoil since August, when it warned that its exposure to Franchise could result in a write-down and losses for the second quarter ended June 30.
It also postponed filing its quarterly report with regulators, the third such instance this year, due to a hold-up in finalizing the valuations of certain loans and investments.
The bank 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 also cleared B. Riley of any wrongdoing. But a stock rout has erased 79% of the bank's value so far in 2024.