B. Riley to sell Great American Group unit to Oaktree for about $400 million, WSJ reports

(Reuters) – Investment bank B. Riley has agreed to sell its appraisal and valuations unit, Great American, to asset-management firm Oaktree Capital for about $400 million, the Wall Street Journal reported on Sunday, citing people familiar with the matter.

As part of the deal, B. Riley will receive about $203 million in cash, preferred equity interests in a new holding company for Great American worth about $183 million and a minority share of common equity interests in the holding company, the report said.

B. Riley declined to comment on the report. Oaktree Capital did not immediately respond to Reuters’ request for comment.

The bank had said last month it was in exclusive negotiations with a global asset manager to sell a 53% stake in its Great American Group business.

Proceeds from the unit’s sale could be used to reduce its debt, it had said.

Shares of the bank jumped nearly 26% before the bell on Monday.

A deal could allay investor concerns over the hit from B. Riley’s exposure to Vitamin Shoppe-owner Franchise Group (NASDAQ:FRG).

B. Riley had warned in August that its exposure to Franchise could result in a write-down and losses for the second quarter ended June 30.

The bank also postponed filing its quarterly report with regulators, the third such instance this year, due to a hold-up in finalizing the valuations of certain loans and investments.

Meanwhile, B. Riley is also fielding a take-private offer from its co-founder and co-CEO Bryant Riley, who said being a public company has compelled it to focus “on short-term objectives and allocate unnecessary attention and time on constituencies who are not aligned with the owners of the business”.

A stock rout has erased 79% of the bank’s value so far this year.