B. Riley Financial announced this week that it is splitting off its investment banking unit while also retaining the majority of the shares in the new company. As part of this deal, B. Riley merged with shell entity Cascadia Investments. And certain investors in Cascadia will become minority stockholders of the investment bank, which is called B. Riley Securities (BRS).
B. Riley Securities will establish its own operating and governance structure. The common stock will now be traded on the OTC Pink market under the symbol “BRLY.”
BRS will independently report financial results, which will enhance transparency and allow stakeholders to independently value a pure-play investment bank focused on the small cap and middle markets.
Since acquiring FBR in 2017, BRS has led over 250 capital markets transactions, raised over $115 billion in debt and equity for clients, and advised on M&A and restructuring transactions totaling more than $33 billion in aggregate value. The firm, which will be led by Andy Moore, Chairman and Co-Chief Executive Officer, and Jimmy Baker, Co-Chief Executive Officer, will be debt-free and leverage the same strong leadership team that has guided the business for nearly two decades.
The deal has been structured as a tax-free separation with minimal costs. After implementing the transaction, BRF owns approximately 89% of the outstanding shares of BRS, with the remaining shares exclusively held by BRS employees in the form of restricted stock awards and certain existing shareholders of Cascadia.
BRS is quoted on the OTC Pink market under “BRLY.” The BRS Board of Directors consists of five members, with four appointed by BRF including, no later than 30 days from the date of the transaction, two directors independent of BRF and BRS. And BRF will continue to consolidate the financial results for BRS in its financial results.
Sullivan & Cromwell served as legal counsel to BRF, and O’Melveny & Meyers served as legal counsel to BRS in connection with the announcement.
KEY QUOTES:
“BRS has been the foundation of our firm’s success ever since we started a smaller broker dealer focused on small cap companies in 1997. Through this transaction, we are enabling the leadership team of BRS to return to those roots, operate separately and execute a distinct growth strategy. As we demonstrated at our 2023 Investor Day, BRS has historically delivered steady EBITDA and strong cash flow, and we expect that as a separate entity, the firm will be able to return to and eventually exceed those levels of growth and profitability. Through BRF’s 89% ownership stake, BRF shareholders will retain important upside potential as BRS capitalizes on an expected recovery in M&A and Capital Markets activity.”
- Bryant Riley, Chairman and Co-Chief Executive Officer of BRF
“We are extremely enthusiastic about how this transaction repositions our firm and what it means for our ability to serve our clients. With a well-capitalized balance sheet, no debt and an exceptional team, BRS is purpose-built to serve the middle market with unmatched capabilities across Capital Markets, Research and M&A Advisory. We will stay true to our heritage and relentlessly focus on executing on behalf of our clients. We look forward to embarking on this next chapter and delivering for all stakeholders.”
- Moore and Baker
