SOMERSET, N.J. - CompoSecure, Inc. (NASDAQ:CMPO), a $1.38 billion market cap company known for its metal payment cards and security solutions, announced today its plan to spin off Resolute Holdings Management, Inc., a newly formed subsidiary, into a separate publicly traded company. The announcement comes as CompoSecure's stock has delivered an impressive 207% return year-to-date, according to InvestingPro data, which also indicates the stock is currently trading slightly above its Fair Value. The spin-off is expected to be completed in the first quarter of 2025, subject to customary conditions and approvals.
The transaction will involve a pro rata distribution of shares in Resolute Holdings to all existing shareholders of CompoSecure. This means each shareholder will receive shares in Resolute Holdings proportionate to their current stake in CompoSecure. The distribution is expected to be taxable for both CompoSecure and its shareholders. The company enters this transition with strong fundamentals, maintaining a healthy current ratio of 2.43 and showing steady revenue growth of 9.13% over the last twelve months. InvestingPro subscribers can access detailed analysis and 8 additional key insights about CompoSecure's financial health.
Resolute Holdings will be responsible for overseeing CompoSecure's capital allocation strategy, operational practices, and mergers and acquisitions (M&A) sourcing and execution. The strategy aims to focus on acquisitions that complement CompoSecure's current operations and diversify its business and customer base. CompoSecure's existing management, led by President and CEO Jon Wilk, will continue to manage day-to-day operations.
David Cote will serve as Executive Chairman and Tom Knott as CEO of Resolute Holdings. The spin-off is designed to facilitate organic growth and value-enhancing acquisitions for CompoSecure. However, Resolute Holdings is expected to have limited profitability in fiscal year 2025 as it establishes its operations.
The spin-off is subject to the effectiveness of a Form 10 registration with the Securities and Exchange Commission and final approval by CompoSecure's Board of Directors. Goldman Sachs (NYSE:GS) & Co. LLC is the financial advisor for CompoSecure, with legal advice provided by Paul, Weiss, Rifkind, Wharton & Garrison LLP.
CompoSecure's shareholders are advised that the spin-off will be taxable and are encouraged to consult with their tax advisors regarding the implications. This announcement is based on a press release statement from CompoSecure.
In other recent news, CompoSecure, a financial services company, has seen significant developments. The company issued 3.6 million shares of Class A common stock as part of an earn-out consideration, following the achievement of a specified stock price threshold. This issuance comes in the wake of an impressive year for CompoSecure.
In addition, the company completed an exchange of $130 million notes for stock, a move that aligns with its strategy to reduce debt and improve shareholder value. CompoSecure also eliminated its dual-class structure, establishing a single-class equity structure, and thus streamlining its operational framework.
On the financial front, CompoSecure reported an 11% increase in net sales, amounting to $107.1 million for the third quarter, and a 13% rise in adjusted EBITDA, totaling $40 million. However, it reported a GAAP net loss of $26 million due to non-cash adjustments.
Furthermore, B.Riley financial analysts have upgraded their price target on CompoSecure shares to $23.00, maintaining a Buy rating. This adjustment reflects the company's growth potential, particularly following the recent appointment of Dave Cote as Executive Chairman. These are the latest developments, indicating a period of strategic and financial growth for CompoSecure.
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