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A-Mark Precious Metals, Inc. (NASDAQ:AMRK) (A-Mark), a leading fully integrated precious metals platform, has entered into a non-binding letter of intent with AMS Holding, LLC (AMS), a leading collector platform for the marketing and sales of vintage and modern coins, providing for three transactions, including the proposed acquisition of LPM Group Limited (LPM), one of Asia's largest precious metals dealers.
The proposed transactions are subject to the preparation and execution of definitive agreements and are expected to close simultaneously in February 2024, subject to the receipt of customary closing conditions and required third party consents or approvals, including the consent of the lenders under A-Mark's Trading Credit Facility.
LPM Overview and Financial & Operational Highlights
Established in 2012, LPM is one of the largest precious metals wholesalers in Asia. Headquartered at the heart of Hong Kong's Central Financial District, LPM boasts the city's largest numismatics showroom. LPM offers a wide selection of products through its retail store and 24/7 online trading platform, including recently released silver coins, gold bullion, certified coins, and the latest collectible numismatic issues. The company's global customer base spans sovereign and private mints, manufacturers and fabricators, investors, collectors, e-commerce customers, and other retail customers.
LPM three-year average financial and operational highlights include*:
*The results of LPM have been provided to A-Mark by AMS, have been subject to year over year fluctuation, and are subject to A-Mark's continuing diligence.
"Acquiring LPM will be an important step in growing A-Mark's international presence, specifically in Asia," said A-Mark CEO Greg Roberts. "Having established a relationship with AMS through supplier agreements, the timing was opportune to integrate LPM into our portfolio and extend A-Mark's global reach. With access to A-Mark's inventory and resources, we expect that LPM will be able to secure larger purchase orders while providing customers with a broader set of product offerings. Our strategy is to expand LPM's direct-to-consumer business through our proven e-commerce expertise, while offering its global customer base a broader portfolio of products and ancillary services such as storage and fulfillment."
LPM Transaction Details
The letter of intent provides that A-Mark will acquire 100% of the issued and outstanding equity interests of LPM Group Limited (LPM) from AMS for total upfront consideration of $41.5 million, consisting of $37.5 million in cash, subject to certain closing adjustments, and $4.0 million of A-Mark common stock. The letter of intent further provides that LPM will have a tangible net worth of $11.5 million inclusive of net cash and precious metals inventories. The letter of intent also contemplates that AMS will have the potential to earn up to an additional $37.5 million in cash based on achievement of certain Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) targets for 2024, 2025 and 2026.
LPM CEO Charlie Chang, who is expected to sign a consulting agreement with A-Mark in connection with the transaction, commented: "Since our founding, LPM has been focused on developing strong relationships with both wholesale and retail customers across Asia. Joining forces with A-Mark, I am eager to capitalize on A-Mark's extensive resources and capabilities to deepen our presence and expand our footprint within the retail and wholesale precious metals market in Asia."
Pinehurst Coin Exchange Asset Purchase of ModernCoinMart
Under the letter of intent, A-Mark affiliate, Pinehurst Coin Exchange, Inc. (Pinehurst), one of the nation's largest distributors of modern certified coins of which A-Mark owns 49.0%, will acquire all the assets of ModernCoinMart (MCM) from AMS for $5.5 million, subject to certain closing adjustments. MCM is one of the fastest growing dealers in the U.S. and ships to many international destinations. As part of the asset purchase, Pinehurst will acquire $3.0 million of inventory, along with MCM's customer list, brand name, and related intellectual property.
Pinehurst CEO Vince Wade commented: "Since its inception in 2004, ModernCoinMart has established a formidable e-commerce presence and cultivated a loyal customer base. In our pursuit of expanding our direct-to-consumer business, we are confident that MCM's adept use of eBay, coupled with the appealing collectability of its modern bullion coins, will not only retain existing customers but also attract new ones. We believe that the combination of effective online strategies and enticing product offerings positions MCM and Pinehurst for continued success in capturing market share and engaging a broader audience."
Strategic Investment in AMS Holdings
The letter of intent further provides that a proposed joint venture consisting of A-Mark, Pinehurst and Stack's Bowers Numismatics, LLC, an affiliate of A-Mark, will acquire a common equity interest in AMS equivalent to 10% of the total, fully diluted common equity interests in AMS. As part of the proposed investment, A-Mark CEO Greg Roberts will join the AMS board of directors.
AMS CEO Jim Hilt commented: "These transactions underscore our strategic transformation as a platform that will define the next era of collecting in our industry. Greg's leadership in turning A-Mark into a globally recognized fully integrated platform make him and his team a perfect partner for AMS and we look forward to the benefit of his expertise on our board. This is a critical step in our evolution to accelerate our growth, create industry impact, and drive value for collectors in our markets."
Transaction Advisors
D.A. Davidson & Co. is acting as financial advisor to A-Mark, and Kramer Levin Naftalis & Frankel LLP and Frye & Hsieh LLP are acting as legal advisors to A-Mark. Houlihan Lokey is acting as financial advisor to AMS, and Ballard Spahr LLP is acting as legal advisor to AMS.
Conference Call
A-Mark will hold a conference call today, February 6, 2024, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the proposed transactions as well as the company's financial results for the fiscal second quarter ended December 31, 2023. A-Mark management will host the presentation, followed by a question-and-answer period.
A-Mark's conference call can be accessed as follows:
U.S. dial-in number: 1-888-506-0062
International number: 1-973-528-0011
Participant Access Code: 362228
Webcast: https://www.webcaster4.com/Webcast/Page/2867/49671
Please call the conference telephone number 10 minutes before the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact A-Mark's investor relations team at 1-949-574-3860.
A replay of the call will be available after 7:30 p.m. Eastern time on the same day through February 20, 2024.
Toll-free replay number: 1-877-481-4010
International replay number: 1-919-882-2331
Participant Access Code: 49671
The call will also be broadcast live and available for replay on the Investor Relations section of A-Mark's website at ir.amark.com/.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any shares of common stock of A-Mark. Any offer will be made only by means of a prospectus supplement and accompanying prospectus forming a part of an effective registration statement of A-Mark.
Posted In: AMRK
