1847 Holdings On Cusp Of Closing Sale Of 1847 Cabinets, Proceeds To Go To Working Capital, Liabilities And Potential Share Buyback

When it comes to successful exits of its portfolio companies, 1847 Holdings LLC. EFSH may be about to add yet another item to its list of successes. The publicly traded diversified acquisition holding company is proving its mettle, most recently with the potential sale of 1847 Cabinets, which designs, manufactures and installs cabinets, doors and millwork for residential construction. In February, 1847 hired Spartan Capital Securities LLC to pursue an exit, and it now appears to be making serious progress on that front. 

Late last month, 1847 signed a non-binding letter of intent or LOI with a strategic buyer to purchase 1847 Cabinets. Under the terms of the deal, the buyer offered $27.6 million for 1847 Cabinets' assets, including $11.5 million in earn-out payments over three years. The offer price represents a 5.91x multiple of the company's 2023 EBITDA of about $4.7 million. The deal is going through normal due diligence and is expected to close within 90 days, reports 1847. 

“We are pleased with the progress we have made advancing this transaction," 1847 CEO Ellery Roberts said. "This sale represents an important strategic move for 1847, one that validates our ability to purchase, operate and enhance the value of assets and then reach a sale, which will significantly enhance our financial position, enabling us to reallocate resources strategically and capitalize on emerging opportunities within our portfolio and beyond, with a long-term focus on maximizing value for shareholders.” 

The company says proceeds from the transaction will be used to repay senior secured debt and other liabilities, allocate funds for working capital and future acquisitions, as well as potentially initiate a share repurchase program. 

It's All In A Day's Work 

The potential exit of 1847 Cabinets is in line with the goals of the New York City PE holding firm that targets small businesses, largely in consumer-facing markets with revenues of $5 million or more, a current EBITDA/pre-tax income of a minimum of $1.5 million and a history of positive cash flow. It seeks to find small businesses that it believes are undervalued but have a lot of potential and growth prospects 1847 can unlock. In other instances, 1847 will hold on to the asset, contributing to the company's ability to pay regular and special dividends to investors.  

1847 isn't your run-of-the-mill private equity firm either. Unlike traditional private equity firms that create massive funds for investors, 1847's shareholders have stock in each individual operating entity it owns. The idea is to have similar exits to the IPO of 1847 Goedeker's in July 2020. After 1847 purchased it in April 2019 for $6 million, the online purveyor of appliances, furniture and home goods direct to consumers went public with a valuation of just under $60 million.

Despite its successes, the company views its shares as undervalued and as a result could engage in share buybacks. Roberts and other executives have been snapping up shares over the past few months, underscoring their commitment to the business. In a Securities and Exchange Commission filing the company disclosed Roberts purchased 154,364 shares on March 4 for $3.30 per share. Roberts had previously acquired 6,251 shares on January 30 at $1.353 per share. Following the share purchase, Roberts owns 169,648 shares in 1847. 

“While this sale marks a significant milestone, it’s just one aspect of our broader strategy aimed at optimizing asset allocation and enhancing overall shareholder returns," said Roberts of 1847 Cabinets. "The proposed transaction highlights what we believe is the considerable undervaluation of the company relative to the intrinsic value of our portfolio companies. The acquisition price underscores the inherent value and potential of 1847 Cabinets, as it is priced at a substantial premium compared to the current market valuation for the entire company."

More Spinoffs In The Works 

With an 1847 Cabinets deal in the works, next up could be ICU Eyewear Holdings Inc., a leading designer of over-the-counter (OTC), non-prescription reading glasses, sunglasses, blue light-blocking eyewear, sun readers and outdoor specialty sunglasses which 1847 acquired for $4.5 million in February 2023. Founded in 1956 and headquartered in Hollister, California, it reports being the number one provider of OTC eyewear at Target Corp. TGT and having a huge customer base of national, regional and specialty retailers. All told, ICU eyewear can be found in 7,500 retail locations across the country. "It's attracted some interest largely because ICU has done such a good job serving one of the largest retailers in the world, Target. That significant presence is incredibly attractive to strategic investors," said Roberts. 

From cabinets to eyewear, 1847 is proving it is adept at finding undervalued gems, shining them up and positioning them for a sale or spin-off. With more promising companies in its portfolio, investors may want to pay close attention to what this PE firm does next. 

Featured photo by Tim Mossholder on Unsplash.

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