(Reuters) - Fortress Biotech Inc (FBIO.O) said on Monday it will sell its majority stake in the independent wealth management firm National Holdings Corp (NHLD.O), bringing an end to an unusual ownership arrangement that had drawn scrutiny from the investing and securities industries.
Investment bank and brokerage B. Riley Financial (RILY.O), which had previously attempted to acquire National in late 2015, agreed to buy the company this time for about $22.9 million, according to a joint statement by National and B. Riley on Monday.
Fortress bought its 56.1 percent stake in National in September 2016, effectively acquiring an in-house underwriter and sales force that the biotechnology company could use to raise money for its nine start-up subsidiary companies.
The ownership structure presented potential conflicts of interest for National and its roughly 700 brokers, which at one time were considered by the Financial Industry Regulatory Authority (FINRA) to be high-risk because the firm and many of its brokers had regulatory red flags on their records.
Reuters in August reported on the conflicts of interest, which included brokers selling retail investors stakes in National’s parent company’s start-ups.
In the deal finalized Friday, Fortress sold 24 percent of its stake to B. Riley for $3.25 per share, and will sell the remaining shares at the same price pending approval from FINRA.
“The opportunity to strategically invest in a growing business, below book value and near cash value, is in my view, an excellent investment for our stakeholders,” Bryant Riley, B. Riley’s co-chief executive and chairman, said in a statement.
Fortress’s shares rose 11.2 percent to $1.37 and National was up 2.8 percent to $3.07 in morning trading.
Reporting by Manas Mishra in Bengaluru and Elizabeth Dilts in New York; Editing by Saumyadeb Chakrabarty and Bill Berkrot