Car-Mart hires investment firm, appoints board member as it evaluates ‘strategic alternatives’
Rogers-based America’s Car-Mart Inc. has retained a global investment bank to serve as its financial adviser as the company considers “strategic alternatives,” including potential financing, recapitalization, mergers and acquisitions, and other transactions.
The moves were outlined in a May 29 filing with the U.S. Securities & Exchange Commission.
On May 22, the Car-Mart Board of Directors retained investment bank Houlihan Lokey Capital Inc., established a committee to oversee the company’s review of strategic alternatives and added a new board member, Adam Paul, president of AP Advisors LLC, to serve as chair of the new committee. The addition of the board member expanded the company’s board to 10 members.
Along with Paul as chair, the committee includes Joshua Welch and Jonathan Buba. The committee is expected to evaluate any financing, refinancing, or recapitalization transaction; raising capital through the issuance of equity securities; asset sales; review and modification of the company’s debt facilities; and other strategic alternatives. It will have authority to review, evaluate, negotiate, and make recommendations to the board regarding the strategic alternatives review and related transactions. The board retains the authority to approve any transaction following a committee recommendation.
Houlihan Lokey Capital will serve as an adviser to the company and the committee in regard to the evaluation of strategic alternatives.
“The board and management continue to evaluate the full range of paths available to the business in the interest of all stakeholders,” according to the filing.
Paul has more than 25 years of experience advising boards of directors, senior officers, and public and private companies on capital structure, strategic alternatives, recapitalizations and complex financial transactions. He’s served as an independent director and special committee member for multiple companies across industries including retail, healthcare, energy and food services.
“The company believes that Mr. Paul’s extensive capital structure, capital markets, and board advisory expertise qualify him to serve as one of its directors,” the filing shows.
According to an independent director agreement with the company, Paul will be paid $45,000 monthly for a minimum of three months. He will receive an additional $4,000 per day if his work on the board exceeds four hours. He can also receive reimbursement for business-related expenses. The agreement doesn’t have a fixed term, but it can be terminated with 10 days’ notice by either the company or Paul.
In April, Car-Mart closed 42 dealerships amid market challenges that impacted its establishment of a “non-recourse revolving warehouse credit facility,” according to an April 7 filing with the U.S. Securities and Exchange Commission. By April 14, the company had 94 dealerships, down from 136.
In the company’s third quarter, which ended Jan. 31, Car-Mart reported a loss of $76.71 million, or a loss of $9.25 per share, compared to earnings of $3.15 million, or 37 cents per share, in the same period last year. Revenue declined by 12% to $286.79 million from $325.72 million.
In the third quarter, Car-Mart completed the first two phases of a cost-control strategy, closing 18 dealerships. Its dealerships fell from 154 to 136 after those closures.
Shares of Car-Mart (NASDAQ: CRMT) closed Wednesday (June 3) at $7.37, down 97 cents or 11.63%. In the past 52 weeks, the stock has ranged between $6.50 and $62.72. The stock hit the 52-week low on Tuesday (June 2).