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March 22, 2024NEW YORK, NY / ACCESSWIRE / March 20, 2024 / When it comes to successfully spinning off companies, Ellery Roberts knows a thing or two about that. As the Chief Executive of 1847 Holdings LLC. (AMEX:EFSH), the diversified acquisition holding company, he is tasked with finding small businesses to acquire, grow and then either spin off or fold into the portfolio of companies it owns.
That strategy seems to already be paying off in the few years since 1847 opened its doors. “We took 1847 Goedeker’s public in July 2020 after purchasing it in April 2019 for $6 million. It went public with a valuation of just under $60 million,” said Roberts in a recent interview with Benzinga. “After repaying a convertible note it all went to shareholders in the form of freely distributable shares. The stock traded at $9 and peaked at $18. All the while 1847 holders were able to sell shares and reap the returns.”
Expertise Pays Off
Robert credits the public holding company’s success with 1847 Goedeker’s to the company’s expertise in identifying small businesses to acquire on the cheap. It targets small businesses with about $5 million of EBITDA and then deploys resources to strengthen the enterprise and improve operations positioning it for a sale or IPO. 1847 Holdings looks for U.S. companies that have the potential for breakout returns and are well-positioned within their respective industries.
“We hit the nail on the head with 1847 Goedeker’s” which is an online purveyor of appliances, furniture and home goods direct to consumers, says Roberts. “There was a huge push into direct-to-consumer and then COVID hit and direct-to-consumer valuations exploded. We owned an asset in the direct-to-consumer space and took advantage of the capital market valuations.”
Another Exit Coming?
1847 is hoping to replicate that success with some of the other companies it has in its portfolio. 1847 Cabinets Inc., a designer, manufacturer and installer of cabinets, doors and millwork for residential construction is a prime example. 1847 recently engaged Spartan Capital Securities, LLC., a U.S. investment bank, to explore a potential spin-off of 1847 Cabinets into a separate publicly traded company, or a different potential strategic transaction to capitalize on 1847 Cabinet’s internal growth and favorable outlook for the business. “Based on 1847 Cabinets’ strong track record, we believe this would be the ideal time to pursue a spin-off or other strategic transaction, similar to our prior IPO and spin-off of 1847 Goedeker’s,” Roberts said. “Spartan Capital brings a strong track record working with middle-market businesses, and we are highly confident in the prospects for this transaction given their solid track record.”
1847 Cabinet includes Kyle’s, a Boise, Idaho, kitchen and bathroom cabinetry company, High Mountain – the Reno, Nevada, carpentry products and services company – and Innovative Cabinets, also based in Reno, which specializes in custom cabinetry and countertops.
Double Digit Growth
For Q3 2023, 1847 Cabinets posted 30% year-over-year growth in revenue, benefiting from a shift to the multi-family home market – which is more resilient in the face of rising interest rates, says Roberts. It also operates in a section of the U.S. which is seeing strong demand. “Idaho and Nevada are two areas where there is significant population and job growth” which benefits 1847 Cabinets, said Roberts. 1847 Cabinets is more profitable on a stand-alone basis than FGI Industries Ltd., a publicly traded company focused on cabinets. It’s important to note, however, that there is no guarantee the process will result in a spin-off or strategic exit of 1847 Cabinets since the company hasn’t set a timetable for the completion of the process.
With a focus on consumer-facing small businesses and a long track record in nurturing and growing enterprises, Roberts and 1847 Holdings believe it’s well-positioned to successfully spin off the companies it acquires now and in the future, unlocking value for shareholders.
Featured photo by R ARCHITECTURE on Unsplash.
Source: https://finance.yahoo.com/news/interview-benzinga-sits-down-diversified-153000300.html
