B. Riley Financial, Inc. Acquires 29% of bebe stores, inc.
January 16 2018 - 7:00AM
B. Riley Financial, Inc. (“B. Riley”)
(NASDAQ:RILY), a diversified financial services company, and bebe
stores, inc. (“bebe”), announced today that B. Riley has made an
equity investment in bebe to create a tax efficient platform which
is intended to be leveraged for investments in profitable
businesses. B. Riley has converted its existing loan to bebe into
shares of bebe common stock and has acquired additional shares
resulting in B. Riley’s ownership of approximately 29% of bebe’s
shares outstanding. Simultaneously with the investment, B. Riley
was granted two of five seats on the bebe Board of Directors. B.
Riley expects bebe to generate dividends through the acquisition of
cash-generating companies and the utilization of its net operating
losses.
The bebe investment represents an attractive opportunity for B.
Riley. After successfully divesting its retail stores, bebe
contributed all of its intellectual property rights including
licensing revenue to BB Brand Holdings LLC, bebe’s operating
subsidiary which is 50% jointly owned by Bluestar Alliance LLC and
generated approximately $2.9 million in revenue during the quarter
ended September 30, 2017. As a result of these transactions,
bebe has minimal expenses and has maintained approximately $340
million net operating loss carryforwards. bebe also owns its former
corporate headquarters free and clear of any debt obligations, and
this significant real estate asset, which is currently held for
sale, is believed to be valued at approximately $30 million.
“Our relationship with bebe illustrates our strong platform of
retail services. Great American Group was instrumental in helping
bebe with its retail strategy, while B. Riley FBR and Great
American Capital Partners played a pivotal role in transforming the
business and providing the capital it needed to explore other
strategies,” said Bryant Riley, Chairman and CEO of B. Riley
Financial. “This investment reflects the core strategy of B. Riley
Principal Investments which is to invest in companies or corporate
assets that present attractive cash flows to generate dividends for
shareholders. By leveraging bebe’s net operating losses and new tax
laws for cash and dividend investments, our focus is to produce
attractive investment yields for bebe and B. Riley
shareholders.”
Manny Mashouf, founder, Chairman of the Board and Chief
Executive Officer of bebe, stated, “I am delighted to have B. Riley
as a partner and major investor in bebe. Their investment
represents significant value for bebe’s shareholders with an
approximately 35% premium over bebe’s trading price and will
provide an added level of strategic direction to our business as
well as further stabilization to the investor base. We look forward
to having B. Riley’s leadership on the board, and to the
incremental shareholder value we expect they will create. I would
also like to thank our current board members for their guidance and
support in the strategic transition of bebe and for making this
investment possible.”
B. Riley’s investment in bebe involved the conversion of all
outstanding principal and accrued interest owed by bebe to B. Riley
under an outstanding loan in the aggregate amount of approximately
$16.9 million into approximately 2.82 million newly issued shares
of bebe common stock at a conversion price of $6.00 per share,
which represents a premium of approximately 35% over bebe’s trading
price of $4.44 at the close of business on January 12, 2018.
Additionally, B. Riley purchased 250,000 shares of newly issued
common stock from bebe and an additional 250,000 shares of common
stock from a family trust formed by Mr. Mashouf, in each case for
cash in the amount of $6.00 per share. In total, B. Riley acquired
3,319,528 shares of bebe common stock as a result of these
transactions. As part of the agreement with bebe, B. Riley
Principal Investments’ Chief Executive Officer, Kenny Young, and
Chief Investment Officer, Nick Capuano, have joined bebe’s Board of
Directors. In addition, two existing members of bebe’s board of
directors have tendered irrevocable written resignations effective
on the earlier of a notice from bebe accepting the resignation of
such director or October 1, 2018.
It is anticipated that the bebe shares will be contributed to B.
Riley’s subsidiary, B. Riley Principal Investments, LLC, joining
its growing portfolio of cash-flow rich business. B. Riley
Principal Investments owns and operates United Online, Inc. and is
expected to close its acquisition of magicJack VolcalTec Ltd. later
this year.
Sullivan & Cromwell LLP served as legal counsel to B. Riley.
Latham & Watkins LLP advised bebe on the transaction.
About B. Riley Financial, Inc.
B. Riley Financial, Inc. is a publicly traded, diversified
financial services company which takes a collaborative approach to
the capital raising and financial advisory needs of public and
private companies and high net worth individuals. The company
operates through several wholly-owned subsidiaries,
including B. Riley FBR, Inc., Wunderlich Securities,
Inc., Great American Group, LLC, B. Riley Capital
Management, LLC (which includes B. Riley Asset
Management, B. Riley Wealth Management, and Great
American Capital Partners, LLC) and B. Riley Principal Investments,
a group that makes proprietary investments in other businesses,
such as the acquisition of United Online, Inc.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact
are forward-looking statements. These forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause B. Riley's or bebe's performance or achievements to
be materially different from any expected future results,
performance, or achievements. Forward-looking statements speak only
as of the date they are made and neither B. Riley nor bebe assume
any duty to update forward looking statements. We caution readers
that a number of important factors could cause actual results to
differ materially from those expressed in, or implied or projected
by, such forward-looking statements. Such forward-looking
statements include, but are not limited to, statements about the
benefits of B. Riley’s investment in bebe, including future
financial and operating results, B. Riley’s or bebe’s plans,
objectives, expectations and intentions and other statements that
are not historical facts and statements regarding the value,
treatment and availability of bebe’s net operating loss
carryforwards. The following factors, among others, could cause
actual results to differ from those set forth in the
forward-looking statements: (i) the risk that the benefits from the
transaction may not be fully realized or may take longer to realize
than expected, including as a result of changes in general economic
and market conditions, interest and exchange rates, monetary
policy, laws and regulations and their enforcement, the degree of
competition in the geographic and business areas in which B. Riley
and bebe operate; (ii) the reaction to the transaction of the
companies' customers, employees and counterparties; and (iii) other
risks that are described in B. Riley's and bebe's public filings
with the Securities and Exchange Commission.
Media Contact for B. Riley Financial Joe
LoBello LoBello Communications Tel: (516) 902-2684
Joe@LoBelloCommunications.com
Media Contact for bebe stores, inc. Manny
Mashouf President and Chief Executive Officer Tel: (415)
715-3900
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