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Basch Report
Jax Daily Record Thursday, Oct. 7, 202105:00 AM EST

Fanatics attracts more private capital

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Firms invest $350 million in the Jacksonville-based company’s new trading card subsidiary.
by: Mark Basch Contributing Writer

As Wall Street waits for a seemingly inevitable initial public offering, Jacksonville-based Fanatics Inc. continues to attract additional private investment.

The company’s new trading cards subsidiary received $350 million in capital from a group of new and existing investors, according to reports last week by major financial news outlets.

Reuters news service, citing an unnamed source and documents it reviewed, said the investment values Fanatics Trading Cards at $10.4 billion.

Fanatics owns 80% of the new trading card subsidiary, with the rest owned by investors including major U.S. sports leagues and the players associations of those leagues.

The sports merchandising company’s total value is estimated at $18 billion.

Fanatics made a splash in August by agreeing to card deals with Major League Baseball and the Major League Baseball Players Association, taking the business from iconic baseball card firm Topps Co., which had a 70-year relationship with Major League Baseball.

Although Fanatics hasn’t made any announcements, the financial news outlets said the company also has card deals with the players unions of the NFL and NBA.

Fanatics dominates the market for selling sports merchandise and its trading card deals are part of its plan to expand its reach into new markets.

The company also is strongly rumored to be looking for opportunities in online sports gambling.

Before becoming an online retail giant, Fanatics was founded in 1995 by brothers Mitchell and Alan Trager as a single retail store in the Orange Park Mall.

The Tragers sold the company in 2011 for $277 million and it now is part of a Philadelphia-based holding company called Kynetic.

The Wall Street Journal has reported Fanatics expects revenue of $3.4 billion this year.

Anthem deal prodded Triple-S to GuideWell

Triple-S Management Corp., the Puerto Rican licensee of the Blue Cross Blue Shield insurance brand, had talked to potential acquirers as far back as 2016.

However, an acquisition of a competitor pushed Triple-S to seek a deal with GuideWell Mutual Holding Corp., according to a proxy statement filed by Triple-S.

Jacksonville-based GuideWell operates Florida Blue, another one of the 35 independent Blue Cross Blue Shield health insurance companies.

GuideWell agreed Aug. 23 to buy Triple-S after several months of negotiations, according to the proxy filed by publicly traded Triple-S for its shareholders to vote on the deal.

Triple-S reached out to GuideWell after Anthem Inc. agreed Feb. 2 to buy MMM Holdings, a major competitor of Triple-S in the Puerto Rican market.

The company’s chief legal counsel began “informal discussions” Feb. 18 with GuideWell’s chief legal officer, Charles Joseph, “to discuss industry dynamics in light of Anthem’s recently announced transaction to acquire MMM,” the proxy said.

More executives of both companies joined the discussions in March “to discuss business dynamics in Florida and Puerto Rico and potential benefits of working closer together on various complementary business initiatives, including through a possible business combination,” it said.

They arranged a telephone meeting April 6 between Triple-S Chief Executive Roberto Garcia-Rodriguez and GuideWell CEO Pat Geraghty, and Geraghty indicated interest in a possible acquisition, it said. That led to formal merger negotiations.

GuideWell and Triple-S announced the $900 million buyout agreement Aug. 24.

The agreement calls for Triple-S to continue to operate as a subsidiary of GuideWell under its current management once the deal is completed, which is expected in the first half of 2022.

The proxy said Triple-S expects $4 billion in revenue this year and projects it to grow to $4.9 billion in 2024.

The filing does not have financial data for GuideWell, a not-for-profit mutual holding company that does not publicly report its earnings.

However, GuideWell said when the merger was announced it had $20 billion in 2020 revenue.

Treace adds two female directors

Treace Medical Concepts Inc. added two women last week to its previously all-male board of directors.

The Ponte Vedra-based company said Betsy Hanna and Deepti Jain were appointed to the board Oct. 1.

Hanna is a former Johnson & Johnson executive who now is CEO of Clinical Genomics, Inc., a provider of cancer diagnostic solutions.

Jain most recently was president of IngenioRX, the pharmacy benefit management division of Anthem, from 2018 to 2020.

Treace produces surgical systems to treat bunions and other foot issues.

The company listed a board of directors of eight men when it launched its initial public offering in April.

First analyst coverage for Redwire Corp.

Redwire Corp. received its first formal analyst coverage last week since becoming a public company as Jefferies analyst Greg Konrad rated the Jacksonville-based space technology company’s stock at “buy.”

“Redwire offers a diversified portfolio of space components that are well-positioned to capture emerging trends around a growing number of small sat launches and expansion into deep space exploration, as well as battle-tested products that provide a solid revenue base,” Konrad said in his research report.

Redwire was formed last year by mergers of seven space technology companies, including Jacksonville-based Made In Space.

“M&A has created a broad set of innovative solutions diversified across the space market while lowering competitive and market risk relative to single-product companies,” Konrad said.

“In many cases, Redwire is embracing the new space economy with technologies that expand the aperture of the market and take advantage of market trends that include lower launch costs coupled with increasing use cases for space,” he said.

Redwire, which had $63.8 million in revenue in the first half of 2021, has ambitious growth plans and has projected revenue to reach $1.4 billion by 2025.

Konrad also projects big growth but has a lower target of $1.02 billion in revenue by 2025.

“Although we believe the level of revenue growth is plausible, we acknowledge the potential for variability around timing,” he said.

As a company still in its startup phase, Redwire is losing money. Konrad projects it to reach profitability in 2023.

Konrad set a price target of $15 for Redwire, with the stock trading at $10.48 at the time of his Sept. 28 report.

Redwire became a public company by merging with a special purpose acquisition company called Genesis Park Acquisition Corp. on Sept. 2.

Analyst upgrades Black Knight

Black Knight Inc.’s stock dropped 19% in the first nine months of this year, but Raymond James analyst Patrick O’Shaughnessy expects a rebound, upgrading the stock’s rating from “market perform” to “outperform” last week.

“We believe EPS is poised to return to double-digit growth in 2022 due to the end of the federal foreclosure moratorium as well as cross-selling momentum,” O’Shaughnessy said in a research note.

Jacksonville-based Black Knight is the dominant company in its field, providing technology for mortgage lenders, including foreclosure processing solutions.

“As the federal moratorium has now expired, August saw the greatest number of foreclosure starts of 2021 and this will ultimately translate to more revenue for Black Knight in 2022 as foreclosures make their way through the legal process,” O’Shaughnessy said.

“We also believe the downside from lower mortgage origination activity is relatively modest,” he said. 

“Finally, Black Knight’s valuation multiple is now at a level at which we view the risk/reward as attractive.”

O’Shaughnessy has an $83 target price for the stock, which was trading at $71.22 at the time of his Sept. 29 report.

International Baler CEO resigns

International Baler Corp. said in a Securities and Exchange Commission filing last week that President and CEO Victor Biazis resigned to return to his role as head of a family-owned business.

Biazis joined the Jacksonville-based maker of balers used for industrial recycling and waste disposal in October 2018.

He is returning to his position as president and CEO of Coastal Industrial Products Inc., a Ponte Vedra Beach-based industrial adhesives company he founded.

International Baler said Chief Financial Officer William Nielsen will serve as interim president and chief executive as the company searches for a successor to Biazis.

Nielsen has twice served as International Baler’s CEO, from May 2001 to July 2007 and from January 2017 to September 2018.

First Watch launches successful IPO

First Watch Restaurant Group Inc.’s stock jumped 23% on its first trading day after a successful IPO.

The breakfast restaurant chain sold 9.46 million shares at $18 each and the stock rose $4.13 to $22.13 when it began trading Oct. 1.

First Watch had 423 restaurants in 28 states as of June 27 with its greatest concentration in Florida, with 102 locations. 

The company has almost doubled its Florida sites from 54 six years ago.

Its website lists 10 restaurants in the Jacksonville market.

The company’s IPO registration statement projected the chain has the potential to grow to more than 2,200 U.S. locations.

First Watch was founded in California in 1983 but moved its headquarters to Florida in 1986 when it opened a restaurant in South Sarasota.

The company moved in July into a new corporate headquarters building in Bradenton.

First Watch reported sales of $281 million in the first half of this year and had 28 consecutive quarters of sales growth through 2019 at restaurants open for more than one year before the COVID-19 pandemic slowed business.

Private equity firm Advent International Corp. acquired control of First Watch in 2017 and still controls about 79% of the stock after the IPO, according to the registration statement.

First Watch trades on the Nasdaq Global Select Market under the ticker symbol “FWRG.” 

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