Monday, March 27, 2023

ALJ Regional Holdings: Partial Liquidation Beneath Proforma NCAV

ALJ Regional Holdings (ALJJ) is probably going a well-recognized identify 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 government) used as a holding firm to purchase and promote a number of varied unrelated companies over the past 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 Colour, a specialty e-book printer that manufactures schooling supplies, closely illustrated books, and many others.

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

  • On 12/21/21, ALJ bought a large piece of the Faneuil business to TTEC Holdings (publicly traded as TTEC) for $140MM money ($15MM of which will likely 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 deadline.
  • On 2/4/22, ALJ sold the entire Phoenix Color business to Lakeside Ebook 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 could have roughly $150MM in internet 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 principle cause the inventory is affordable is Jess Ravich, the market would not belief him, one good instance is he participated in a financing spherical throughout covid and obtained convertible debt at a $0.54 conversion worth that PIKed for a 12 months (additional diluting minority shareholders) earlier than it was amended.   One other is he is additionally been dealing with authorized hassle over the last few years regarding his time at TCW.  Now that the NOLs are burned off and/or expiring, perhaps he now not desires to cope with public shareholders and makes use of the money proceeds to take out the minority shareholders.  There may be precedent, he did a big money tender again in 2012 following the sale of a enterprise, the Alpha Vulture blog covered it well back then.

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

Disclosure: I personal shares of ALJJ

Related Articles


Please enter your comment!
Please enter your name here

Latest Articles