NEW
YORK, Sept. 29, 2022 /PRNewswire/ -- ALJ
Regional Holdings, Inc. (OTC PINK: ALJJ) ("ALJ") announced
today that it has acquired the outstanding equity interests of
certain operating companies doing business as Ranew's Companies
from Lester and Susan Ranew. Ranew's
Companies, headquartered in Milner,
Georgia, are leading suppliers of industrial coating
services to multinational manufacturers of equipment and a provider
of precision fabrication and assembly and logistics services. The
transaction was completed pursuant to a Securities Purchase
Agreement, dated September 28, 2022
(the "Purchase Agreement"). Consideration paid by ALJ for
the acquisition at closing was $20.8
million, subject to certain purchase price adjustments and
certain earn-out payments set forth in the Purchase Agreement and
described below. The acquisition was consummated through
Resin Acquisition Corp. (the "Purchaser"), a subsidiary of
ALJ.
As a result of the transactions, Purchaser acquired 100% of the
equity interests of Ranew's Truck & Equipment Company, LLC,
Ranew's Outdoor Equipment, Inc., Ranew's Management Company, Inc.,
Ranew's Well Services Division, LLC, Ranew's Companies, LLC and
Ranew's of Texas,
Incorporated. At the closing, Purchaser issued Mr. Ranew
19.99% of the equity interests in Purchaser in consideration of the
rollover of certain of Mr. Ranew's equity interests. ALJ and
the Purchaser have entered into a stockholders' agreement with Mr.
Ranew providing for certain customary rights, as well as a
purchase/sale right commencing on the fifth (5th)
anniversary of the closing date to cause ALJ to either, at ALJ's
election, (i) purchase all of the common stock of Purchaser held by
Lester Ranew or (ii) sell to
Lester Ranew all of the common stock
of Purchaser held by ALJ, in each case, at a value determined by
Lester Ranew.
The unaudited consolidated revenue for Ranew's Companies for
2021 was approximately $42 million,
with net income of approximately $5.5
million, and for the six months ended June 30, the unaudited consolidated revenue for
Ranew's Companies was approximately $32.5
million with net income of approximately $2.7 million. These results were not
audited, were not prepared in accordance with GAAP and are subject
to adjustment.
The Purchase Agreement includes two (2) earn-out payments in
favor of Lester Ranew. Each earn-out
payment is equal to the product of the increase in the adjusted
EBITDA over EBITDA in the trailing twelve (12) month
("TTM") period prior to the applicable earn-out payment date
multiplied by 3.25.
Effective as of the closing date, ALJ has entered into
employment agreements with each of (i) Robert Brock, as Chief Executive Officer, (ii)
Clay Harmon, as Chief Financial
Officer and (iii) Blake Reeves, as
Director of Operations. The employment agreements include customary
terms, including annual bonuses based upon increases in EBITDA.
Repurchase Transactions
Between August 31, 2022, and
September 12, 2022, ALJ completed
additional repurchases of approximately 1.5 million shares of its
common stock for aggregate gross proceeds of approximately
$2.9 million with a per share
repurchase price range of $1.84 –
$1.94. The stock repurchases were
completed through unsolicited private transactions.
Investment in A-Mark Precious Metals
On September 16, 2022, ALJ
purchased in the open market a total of 350,000 shares of A-Mark
Precious Metals, Inc (NASDAQ: AMRK) ("A-Mark"). Mr. Ravich
is a member of the board of directors of A-Mark, and this related
party transaction was approved by a majority of the disinterested
directors of ALJ's board of directors. A-Mark is a leading fully
integrated precious metals trading company.
Investment in Hallador Energy
On August 12, 2022, ALJ purchased
an unsecured convertible promissory note (the "Note") from
Hallador Energy Company (NASDAQ: HNRG) ("Hallador") for a
principal sum of $10 million. The
Note bears interest at 8% per annum paid, at Hallador's discretion,
in cash or in shares of Hallador common stock at the lower of
30-day volume weighted average price ("VWAP") or
$6.15 (the trailing VWAP on closing).
The principal balance and all accrued and unpaid interest shall be
paid on the Note's maturity date of December
31, 2026, and no prepayment of such amounts are permitted.
The Note also contains a right to convert the principal and accrued
interest amounts outstanding on the Note (in whole and not in part)
into shares of Hallador common stock at a fixed conversion price of
$6.15 (the trailing VWAP on closing).
In connection with the foregoing, ALJ and Hallador have entered
into a registration rights agreement which provides ALJ with
customary shelf, demand and piggyback registration rights with
respect to shares issuable upon conversion of the Note.
Investment in Qualified Opportunity Zone
As a result of the sale of Phoenix Color Corp. and certain
verticals of Faneuil, Inc. (the "Prior Sale Transactions"),
ALJ exhausted its Net Operating Loss Carryforward. On
September 26, 2022, ALJ invested
approximately $20 million into its
99% owned subsidiary ALJ Qualified Opportunity Fund LLC
("QOF"). QOF expects to invest such proceeds in a Qualified
Opportunity Zone Business, which, under certain conditions, may be
eligible for preferential tax treatment, including allowing ALJ to
defer capital gains generated from the Prior Sale Transactions.
About ALJ
ALJ Regional Holdings, Inc. is the (i) 100% owner of Faneuil,
Inc., a leading provider of call center services, back office
operations, staffing services, and toll collection services to
commercial and governmental clients across the United States; (ii) 100% owner of Realtime
Digital Innovations, Inc. d/b/a Vistio, a provider of workflow
automation and business intelligence services to Faneuil and other
unrelated companies; (iii) 99% owner of QOF; and (iv) 80.01% owner
of Ranew's Companies a leading supplier of industrial coating
services to multinational manufacturers of equipment and a provider
of precision fabrication and assembly and logistics services.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the U.S. federal securities laws about ALJ and
Ranew's Companies and the transaction, including but not limited to
all statements about the amount of earn-out payments to be paid to
Lester Ranew, if any; future
operations; future business performance of ALJ and Ranew's
Companies; all outcomes of the Ranew's transaction; investments to
be made in a Qualified Opportunity Zone, if any; and any
preferential tax treatment in connection with investments in
Qualified Opportunity Zones, which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Words such as "expect," "likely," "outlook," "forecast,"
"preliminary," "would," "could," "should," "can," "will,"
"project," "intend," "plan," "goal," "guidance," "target,"
"continue," "sustain, "synergy," "on track," "believe," "seek,"
"estimate," "anticipate," "may," "possible," "assume," and
variations of such words and similar expressions are intended to
identify such forward-looking statements. You should not place
undue reliance on these statements, as they involve certain risks
and uncertainties, and actual results or performance may differ
materially from those discussed in any such statement. Factors that
could cause actual results to differ materially include but are not
limited to general economic and capital markets conditions;
unexpected costs, charges or expenses; failure to obtain the
results anticipated; and other risks and uncertainties. Although
forward-looking statements contained in this presentation are based
upon what management of the Company believes are reasonable
assumptions, there can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. All forward-looking statements in this release are made
as of the date hereof and we assume no obligation to update any
forward-looking statement.
Non-GAAP Financial Measures and Related Information
This press release includes certain financial measures not
presented in accordance with generally accepted accounting
principles ("GAAP"), including Adjusted EBITDA. These are
not measures of financial performance calculated in accordance with
GAAP and may exclude items that are significant in understanding
and assessing Ranew's Companies' financial results. Therefore, the
measures are in addition to, and not a substitute for or superior
to, measures of financial performance prepared in accordance with
GAAP, and should not be considered in isolation or as an
alternative to net income, cash flows from operations or other
measures of profitability, liquidity or performance under GAAP. You
should be aware that Ranew's Companies' presentation of these
measures may not be comparable to similarly-titled measures used by
other companies.
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SOURCE ALJ Regional Holdings, Inc