A-Mark Closes Previously Announced Acquisition of LPM Group Limited, Marking A-Mark’s Expansion into Asia

Rhea-AI Summary

A-Mark Precious Metals, Inc. (AMRK) completes the acquisition of LPM Group Limited, one of Asia's largest precious metals dealers, expanding its footprint into Asia. The transaction details include a total upfront consideration of $41.9 million, with potential additional cash earnings for AMS based on certain EBITDA targets.

Insights

Market Research Analyst

The acquisition of LPM Group Limited by A-Mark Precious Metals, Inc. represents a strategic expansion into the Asian market, which is notable given the region's growing consumer demand for precious metals. This move aligns with the broader industry trend where companies in the precious metals sector are seeking geographical diversification to mitigate market volatility and tap into emerging consumer bases. The use of LPM's Hong Kong headquarters as a launchpad for A-Mark's e-commerce initiatives is expected to enhance their direct-to-consumer sales strategy, leveraging the increasing digitalization of the precious metals market.

Furthermore, the structure of the deal, with a mix of cash and stock plus additional performance-based consideration, reflects a confidence in the synergy between the two entities and a long-term investment in the growth of LPM's operations. It also suggests a careful balance of immediate liquidity impact and future equity potential, which is a prudent approach in a capital-intensive industry.

Financial Analyst

The financial details of the transaction, with an upfront consideration of $41.9 million and an additional contingent payment based on EBITDA targets, indicate a performance-oriented acquisition strategy by A-Mark. This structure can be seen as a move to align the interests of both parties and incentivize the management of LPM to continue driving the business forward. The initial payment relative to the tangible net worth of LPM, which includes net cash and precious metals inventories, appears to be a calculated investment that takes into account the intrinsic value of LPM's assets.

For stakeholders, the short-term implications include a careful watch on the integration process and the realization of projected synergies. Over the long-term, the success of this acquisition will likely be measured by A-Mark's ability to penetrate the Asian market and the performance of the acquired assets against the set EBITDA targets, which could result in additional cash outflows if achieved.

Economist

The acquisition's impact on A-Mark's stock market performance will depend on how effectively the company leverages LPM's market position in Asia and realizes economies of scale. The strategic investment in AMS Holding, combined with the asset purchase from Pinehurst, indicates a consolidation strategy that could lead to increased market power and potentially higher barriers to entry for competitors. The entry of A-Mark's CEO into the AMS board of directors may also foster closer strategic alignment and operational efficiencies between the entities.

From an economic standpoint, the diversification into the Asian market is a significant hedge against regional economic fluctuations. Precious metals often serve as a safe-haven investment and increased market share in Asia could position A-Mark favorably during periods of economic uncertainty. This expansion should be viewed within the context of global economic trends, including currency fluctuations, trade policies and the overall demand for precious metals.

EL SEGUNDO, Calif., Feb. 27, 2024 (GLOBE NEWSWIRE) -- A-Mark Precious Metals, Inc. (NASDAQ: AMRK) (A-Mark), a leading fully integrated precious metals platform, has closed its previously announced transactions with AMS Holding, LLC (AMS), a leading collector platform for the marketing and sales of vintage and modern coins. This transaction included the acquisition of LPM Group Limited (LPM), one of Asia’s largest precious metals dealers.

“Today is a significant day for A-Mark, as we complete the acquisition of LPM and expand our footprint into Asia,” said A-Mark CEO Greg Roberts. “It is also a significant day for LPM, its employees, customers, and partners, as LPM becomes part of one of the world’s largest diversified precious metals businesses. We plan to use LPM’s Hong Kong headquarters as our anchor in Asia to expand LPM’s direct-to-consumer business through our proven e-commerce expertise. We look forward to capitalizing on the consumer demand for precious metals throughout Asia with this strategic acquisition.”

LPM Acquisition Details
A-Mark has acquired 100% of the issued and outstanding equity interests of LPM from AMS for a total upfront consideration of $41.9 million, consisting of $37.9 million in cash and $4.0 million of A-Mark common stock. At the close of the transaction, LPM had a tangible net worth of $11.9 million inclusive of net cash and precious metals inventories. AMS has 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.

Pinehurst Coin Exchange Asset Purchase of ModernCoinMart
A-Mark’s affiliate, Pinehurst Coin Exchange, Inc. (Pinehurst), one of the nation’s largest distributors of modern certified coins of which A-Mark owns 49.0%, has acquired all the assets of ModernCoinMart (MCM) from AMS for $5.5 million. 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 has acquired $3.0 million of inventory, along with MCM’s customer list, brand name and related intellectual property.

Strategic Investment in AMS Holding

A joint venture consisting of A-Mark, Pinehurst and Stack’s Bowers Numismatics, LLC, an affiliate of A-Mark, has acquired a common equity interest in AMS equivalent to 10% of the total, fully diluted common equity interests in AMS for $6.19 million. As part of the transaction, A-Mark CEO Greg Roberts has joined the AMS board of directors.

Transaction Advisors
D.A. Davidson & Co. acted as financial advisor to A-Mark, and Kramer Levin Naftalis & Frankel LLP and Frye & Hsieh LLP acted as legal advisors to A-Mark. Houlihan Lokey acted as financial advisor to AMS, and Ballard Spahr LLP acted as legal advisor to AMS.

About A-Mark Precious Metals
Founded in 1965, A-Mark Precious Metals, Inc. is a leading fully integrated precious metals platform that offers an array of gold, silver, platinum, palladium, and copper bullion, numismatic coins, and related products to wholesale and retail customers via a portfolio of channels. The company conducts its operations through three complementary segments: Wholesale Sales & Ancillary Services, Direct-to-Consumer, and Secured Lending. The company’s global customer base spans sovereign and private mints, manufacturers and fabricators, refiners, dealers, financial institutions, industrial users, investors, collectors, e-commerce customers, and other retail customers.

A-Mark’s Wholesale Sales & Ancillary Services segment distributes and purchases precious metal products from sovereign and private mints. As a U.S. Mint-authorized purchaser of gold, silver, and platinum coins since 1986, A-Mark purchases bullion products directly from the U.S. Mint for sale to customers. A-Mark also has longstanding distributorships with other sovereign mints, including Australia, Austria, Canada, China, Mexico, South Africa, and the United Kingdom. The company sells more than 200 different products to e-commerce retailers, coin and bullion dealers, financial institutions, brokerages, and collectors. In addition, A-Mark sells precious metal products to industrial users, including metal refiners, manufacturers, and electronic fabricators.

Through its A-M Global Logistics subsidiary, A-Mark provides its customers with a range of complementary services, including managed storage options for precious metals as well as receiving, handling, inventorying, processing, packaging, and shipping of precious metals and coins on a secure basis. A-Mark’s mint operations, which are conducted through its wholly owned subsidiary Silver Towne Mint, enable the company to offer customers a wide range of proprietary coin and bar offerings and, during periods of market volatility when the availability of silver bullion from sovereign mints is often product constrained, preferred product access.

A-Mark’s Direct-to-Consumer segment operates as an omni-channel retailer of precious metals, providing access to a multitude of products through its wholly owned subsidiaries, JM Bullion and Goldline. JM Bullion is a leading e-commerce retailer of precious metals and operates seven separately branded, company-owned websites targeting specific niches within the precious metals market: JMBullion.com, ProvidentMetals.com, Silver.com, GoldPrice.org, SilverPrice.org, BGASC.com, and BullionMax.com. JMB also owns CyberMetals.com, an online platform where customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. Goldline markets precious metals directly to the investor community through various channels, including television, radio, and telephonic sales efforts. A-Mark also holds minority ownership interests in four additional direct-to-consumer brands.

The company operates its Secured Lending segment through its wholly owned subsidiary, Collateral Finance Corporation (CFC). Founded in 2005, CFC is a California licensed finance lender that originates and acquires loans secured by bullion and numismatic coins. Its customers include coin and precious metal dealers, investors, and collectors.

A-Mark is headquartered in El Segundo, CA and has additional offices and facilities in the neighboring Los Angeles area as well as in Dallas, TX, Las Vegas, NV, Winchester, IN, and Vienna, Austria. For more information, visit www.amark.com.

A-Mark periodically provides information for investors on its corporate website, www.amark.com, and its investor relations website, ir.amark.com. This includes press releases and other information about financial performance, reports filed or furnished with the SEC, information on corporate governance, and investor presentations.

Important Cautions Regarding Forward-Looking Statements

Statements in this press release that relate to future plans, objectives, expectations, performance, events and the like are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These include statements regarding the anticipated benefits to A-Mark and its affiliates of the transactions. Future events, risks and uncertainties, individually or in the aggregate, could cause actual results or circumstances to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include the following:

With respect to all of the transactions: Adverse facts and circumstances regarding the acquired businesses or investment that are discovered following the closing, notwithstanding the diligence undertaken by the company and its affiliates; greater than anticipated post-closing costs and management resources required to onboard the acquired businesses and investment; and the strategic, business, economic, financial, political and governmental risks and other risk factors affecting the businesses of the company and the industries in which it operates, as described in in the company’s public filings with the Securities and Exchange Commission.

With respect to the acquisition of LPM: The inability to successfully integrate LPM with A-Mark’s other business, as anticipated or at all; the inability to realize the anticipated synergies between LPM and A-Mark’s other businesses; the difficulties in managing a business located outside the United States generally, and in particular in China and other Asian jurisdictions; and LPM’s inability to expand its business in China and other parts of Asia, as anticipated or at all.

With respect to the investment in AMS: The risks associated with the conduct of the business of AMS generally; the inability of the joint venture, as a minority holder, to exercise control over AMS; and the inability of the joint venture to exit its investment in AMS at a profit, at the time of its choosing or at all.

Company Contact:
Steve Reiner, Executive Vice President, Capital Markets & Investor Relations
A-Mark Precious Metals, Inc.
1-310-587-1410
sreiner@amark.com

Investor Relations Contacts:
Matt Glover and Greg Bradbury
Gateway Group, Inc.
1-949-574-3860
AMRK@gateway-grp.com

FAQ

What did A-Mark Precious Metals, Inc. (AMRK) acquire in the recent transaction?

A-Mark acquired LPM Group Limited, one of Asia's largest precious metals dealers.

What was the total upfront consideration for the acquisition of LPM by AMRK?

The total upfront consideration for the acquisition of LPM by AMRK was $41.9 million.

How much cash and A-Mark common stock was included in the total upfront consideration for LPM acquisition?

The total upfront consideration of $41.9 million included $37.9 million in cash and $4.0 million of A-Mark common stock.

What potential additional cash earnings does AMS have based on certain EBITDA targets?

AMS has the potential to earn up to an additional $37.5 million in cash based on certain EBITDA targets for 2024, 2025, and 2026.

What assets did Pinehurst Coin Exchange, Inc. (an affiliate of AMRK) acquire from AMS?

Pinehurst Coin Exchange, Inc. acquired all the assets of ModernCoinMart (MCM) from AMS for $5.5 million.

What strategic investment did A-Mark, Pinehurst, and Stack's Bowers Numismatics, LLC make?

The joint venture acquired a common equity interest in AMS equivalent to 10% of the total, fully diluted common equity interests in AMS for $6.19 million.