Franchise Group, Inc. (NASDAQ: FRG) (“Franchise Group” or the
“Company”), today announced it has entered into a definitive
agreement under which it will acquire American Freight Group, Inc.
(“American Freight”), a retail chain offering brand-name furniture,
mattresses and home accessories at discount prices, in an all
cash transaction valued at approximately $450 million from an
affiliate of The Jordan Company, L.P. and other stockholders of
American Freight (the “Transaction”). Upon the closing of the
Transaction, Franchise Group’s systemwide revenue, which is defined
as total sales for both franchise and company units, will exceed
$2.4 billion.
The Transaction is expected to be completed in
the first quarter of 2020, subject to the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as well as other customary
closing conditions.
In connection with the signing of the
Transaction, Franchise Group intends to sign a new $700 million
credit facility with affiliates of Kayne Anderson Capital Advisors,
L.P. (“Kayne”) and Great American Capital Partners, LLC (GACP), a
subsidiary of B. Riley Financial, Inc. (NASDAQ:RILY), that will
provide 100% of the financing needed for the Transaction, including
the refinancing of the Company’s term loans for its Buddy’s Home
Furnishings and Sears Outlet businesses (the “Financing”). The
Financing will close simultaneously with the Transaction. B. Riley
FBR, Inc. and Kayne acted as advisors for the Transaction.
Brian Kahn, President & CEO of Franchise
Group said, “We are proud to welcome American Freight, its
management team and employees to the Franchise Group. American
Freight is a deep value, category-defining furniture retail model
with a compelling, proven track record of growth and stability
throughout economic cycles.” Mr. Kahn continued, “American
Freight’s unmatched cash-on-cash unit economics make it an
attractive opportunity for franchisees to benefit from a clear
whitespace growth opportunity. We expect that combining American
Freight with our similarly large-format Sears Outlet business and
our small-format Buddy’s Home Furnishings business will generate
significant economic synergies over time that will be realized from
leveraging corporate overhead, vendor and franchisee partnerships,
operating methods, and a common customer base.”
About Franchise Group, Inc.
Franchise Group, Inc. (NASDAQ: FRG) is an
operator of franchised and franchisable businesses and uses its
operating expertise to drive cost efficiencies and grow its
brands. Franchise Group’s business lines include Liberty Tax
Service, Buddy’s Home Furnishings, Sears Outlet and The Vitamin
Shoppe. On a combined basis, Franchise Group operates over
4,300 locations predominantly located in the U.S. and Canada
through company-run and franchising agreements.
About American Freight
Since 1994, American Freight Furniture has
helped customers save money on quality furniture and mattresses.
American Freight buys direct from manufacturers and sells direct in
warehouse-style stores. By cutting out the middle-man and keeping
its overhead costs low, it can offer quality, new furniture and
mattresses at the lowest prices. American Freight offers
same-day delivery on all in-stock items with flexible payment
options including free layaway and take it home today for $50 with
low, easy payment plans. With 176 stores and over 2 million
satisfied customers, American Freight continues to grow while its
mission remains the same: sell the best for less every day while
delivering excellent customer service.
About The Jordan Company
Founded in 1982, TJC is a middle-market private
equity firm that has managed funds with original capital
commitments in excess of $11 billion and a 37-year track record of
investing in and contributing to the growth of many businesses
across a wide range of industries including industrials,
transportation & logistics, healthcare & consumer, and
telecom, technology & utilities. The senior investment team has
been investing together for over 20 years and is supported by the
Operations Management Group, which was established in 1988 to
initiate and support operational improvements in portfolio
companies. Headquartered in New York, TJC also has an office in
Chicago. For more information visit: www.thejordancompany.com
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, as amended, including, without limitation, those that
contain, or are identified by, words such as “outlook”, “guidance”,
“believes”, “expects”, “potential”, “continues”, “may”, “will”,
“should”, “predicts”, “intends”, “plans”, “estimates”,
“anticipates”, “could” or the negative version of these words or
other comparable words. Forward-looking statements may include, but
are not limited to, statements relating to the Transaction,
including synergies and anticipated benefits resulting therefrom;
the product offerings of the Company if the Transaction is
consummated and the Financing, which is subject to various
significant risks and uncertainties, many of which are outside of
the control of the Company. Such forward-looking statements are
based on various assumptions as of the time they are made, and are
inherently subject to known and unknown risks, uncertainties and
other factors that may cause actual results, performance or
achievements to be materially different from historical results and
any future results, performance or achievements expressed or
implied by such forward-looking statements. Additional factors that
could cause actual results to differ materially from
forward-looking statements include, among others, the risk that the
Transaction may not be completed in a timely manner or at all,
which may adversely affect the business and stock price of the
Company; the risk of any event, change or other circumstance that
could give rise to the termination of the merger agreement; the
effect of the announcement or pendency of the Transaction on the
ability of the Company and American Freight to retain and hire key
personnel and maintain relationships with their customers,
suppliers, partners and others with whom they do business, or on
their respective operating results and business generally; risks
associated with the diversion of management’s attention from
ongoing business operations due to the Transaction; legal
proceedings related to the Transaction; costs, charges or expenses
resulting from the Transaction; the franchising of the American
Freight business; and the ability of the Company to implement and
execute on its franchise-centric business model; the strength of
the economy; changes in the overall level of consumer spending; the
performance of the products and services of the Company and
American Freight within the prevailing retail or other business
environment; implementation of the strategy of the Company and
American Freight; management changes; maintaining appropriate
levels of inventory; changes in tax policy; ecommerce
relationships; disruptions of repair and distribution facilities or
information systems; or the failure to satisfy any of the other
conditions to the completion of the Transaction. We refer you to
the “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” sections of the
Company’s Annual Report on Form 10-K for the year ended April 30,
2019, and comparable sections of the Company’s Quarterly Reports on
Form 10-Q and other filings, which have been filed with the SEC and
are available on the SEC’s website at www.sec.gov. All of the
forward-looking statements made in this press release are expressly
qualified by the cautionary statements contained or referred to
herein. The actual results or developments anticipated may not be
realized or, even if substantially realized, they may not have the
expected consequences to or effects on the Company or its business
or operations. Readers are cautioned not to rely on the
forward-looking statements contained in this press release.
Forward-looking statements speak only as of the date they are made
and the Company does not undertake any obligation to update, revise
or clarify these forward-looking statements, whether as a result of
new information, future events or otherwise.
INVESTOR RELATIONS CONTACT:Andrew F.
KaminskyEVP & Chief Administrative OfficerFranchise Group,
Inc.akaminsky@franchisegrp.com(914) 939-5161
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