Turning Point Brands, Inc. (NYSE:TPB), a manufacturer of tobacco products with a market capitalization of $1.07 billion, has recently made a strategic business move by transferring its entire interest in South Beach Brands LLC (SBB) to General Wireless Operations, Inc. (GWO).
According to InvestingPro data, TPB maintains a perfect Piotroski Score of 9, indicating strong financial health. In exchange, Turning Point Brands received a significant minority stake in GWO, comprising 1,006.45 shares of common stock and 680 shares of Series B Preferred Stock. This transaction, effective as of January 2, 2025, gives Turning Point Brands a 49% ownership of GWO on a fully-diluted basis.
South Beach Brands, which operates under Turning Point Brands’ Creative Distribution Solutions segment, reported $14.9 million in revenue and positive EBITDA of $270 thousand for the quarter ending September 30, 2024, despite an operating loss of $270 thousand for the same period. GWO, a joint venture formed in December 2018 with Standard General, LP, will now include SBB as part of its operations.
This deal also provides Turning Point Brands with an option to acquire the remaining 51% of GWO. The option, which has a 15-year term, is set at an initial exercise price of $22.0 million, subject to decrease over time based on certain tax sharing payments made to GWO. Furthermore, as part of the agreement, Turning Point Brands will offer transition services to GWO for the management of SBB, ensuring a smooth transfer of operations on an arm's length basis.
The strategic decision to exchange SBB for a stake in GWO allows Turning Point Brands to diversify its investment and potentially strengthen its market position through this partnership. The company also retains the right to redeem its contribution of SBB from GWO at fair market value under specific circumstances.
Investors and market watchers will likely monitor the performance of this new alignment and its impact on Turning Point Brands’ financials going forward. This news is based on a press release statement from the company, filed with the Securities and Exchange Commission.
In other recent news, Turning Point Brands announced an at-the-market offering of $100 million of its common stock in collaboration with B.
Riley Securities, Inc. and Barclays (LON:BARC) Capital Inc. The proceeds from this offering will be used for general corporate purposes. The company also reported strong Q3 2024 financial performance with a rise in adjusted EBITDA by 11% to $27.2 million, driven by revenue increases of 6% and 12% in its popular Zig-Zag and Stoker's brands respectively.
Turning Point Brands has also raised its full-year 2024 adjusted EBITDA guidance to between $101 million and $103 million, reflecting confidence in its ongoing business strategies. Analyst firms Craig-Hallum and Oppenheimer have expressed positive outlooks on the company, maintaining a Buy rating and assigning an Outperform rating respectively. Craig-Hallum even raised the price target to $75, indicating optimism about the company's nicotine pouch market potential.
The company has announced plans for new product launches and market expansions in 2025, along with a $100 million share repurchase program. Its FRE brand reported significant growth, with sales increasing by 342% to roughly $5 million. These recent developments, coupled with a strong liquidity position of over $33 million in cash, underscore a positive outlook for the company's future.
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