Home Value Investing ALJ Regional Holdings: Partial Liquidation Under Proforma NCAV

ALJ Regional Holdings: Partial Liquidation Under Proforma NCAV

ALJ Regional Holdings: Partial Liquidation Under Proforma NCAV

ALJ Regional Holdings (ALJJ) is probably going a well-known 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 govt) used as a holding firm to purchase and promote a number of numerous 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 bunch).  As of 9/30/21, ALJ had two working companies: 1) Faneuil, a enterprise processing outsource supplier and; 2) Phoenix Shade, a specialty guide printer that manufactures training supplies, closely illustrated books, and many others.

Possible 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 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 choice 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 offered your entire Phoenix Shade enterprise to Lakeside Guide 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 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 primary purpose the inventory is reasonable is Jess Ravich, the market does not belief him, one good instance is he participated in a financing spherical throughout covid and acquired convertible debt at a $0.54 conversion value 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 previous few years relating to his time at TCW.  Now that the NOLs are burned off and/or expiring, possibly he not desires to take care of 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 coated it properly again then.

Full disclosure, my value 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 suppose the shares are fairly low-cost.

Disclosure: I personal shares of ALJJ