Santa Ana-based Collectors Universe Inc. last week found itself the object of as much desire among Wall Street heavyweights as the baseball cards and other memorabilia it authenticates.
Collectors Universe (Nasdaq: CLCT)—which provides authentication and grading services to dealers and collectors of coins, trading cards, event tickets, autographs and historical and sports memorabilia—said it will go private in a $700 million deal that valued its shares at $75.25, or a 30% premium to its 60-day average.
The company’s shares at press time traded around $77 and a $717 million market cap.
Among the buyers are hedge fund magnate Stephen A. Cohen, the new owner of the New York Mets baseball team, and Dan Sundheim, who is known as the LeBron James of Wall Street for his ability to make any company look good.
Sundheim, whose D1 Capital opened a $5 billion fund in 2018, is part owner of the Charlotte Hornets basketball team and is a collector of art valued at close to $400 million.
Their investment group is led by Nat Turner, who sold his prior startups, cancer researcher Flatiron Health Inc. for $1.9 billion to Roche Holding AG in 2018 and advertising technology platform Invite Meeting for $81 million to Google in 2010.
“Collecting sports cards and connecting with like-minded hobbyists has been a lifelong passion,” Turner, known for having one of the world’s largest collection of Michael Jordan basketball cards, said in a statement.
The investors “are committed to bringing the resources and expertise necessary to expand the company’s operational capacity and technological capabilities while enhancing the accuracy and consistency for which Collectors Universe is known,” Turner said.
Collectors Universe Chief Executive Joseph J. Orlando will continue to lead the company, which intends to retain its headquarters in Santa Ana.
“As we look to our next chapter, I’m excited to partner with Nat, a fellow lifelong collector and hobbyist whose passion for the collectibles space and substantial experience scaling technology businesses will help position Collectors Universe to drive continued growth,” said Orlando, who joined the company in 1999 and was promoted to CEO in 2017.
Pandemic Boost
The deal culminates a hectic year for Collectors Universe, where shares fell as low as $13.26 in March.
The onset of the coronavirus caused fiscal third quarter sales, typically its strongest quarter of the year, to decline 4% to $18.7 million. The company didn’t lay off any of its employees, which now total 594.
As the pandemic has raged on, business has rapidly improved, thanks to a stuck-at-home customer base looking for activities outside Netflix binging. National reports indicate that the trading card industry, and other collectable sectors, are seeing their best year in over a decade.
The company’s fiscal first quarter sales climbed 52% to a record $30.8 million for the period ended Sept. 30. Its operating income jumped 68% to $7.8 million.
“Our strong growth this quarter was led by our PSA Trading Card and Autograph business, which was up 130% year-over-year,” Orlando told analysts last month.
Doubling HQ Size
Orlando said that the boost in business gave the company the confidence in October to double the size of its headquarters at the Pacific Center office complex.
“We continue to see expanding opportunities ahead,” he told analysts. “To support this growth, we recently announced the expansion of our existing facility in Southern California by an additional 63,000 square feet, which is directly adjacent to our current facility, thereby doubling our square footage to over 126,000 [square feet].”
The buildings are owned by San Francisco’s Drawbridge Realty, which bought the Pacific Center complex last year for a reported $97.5 million.
The new facility has “recently been upgraded and includes space for training rooms that we can utilize for quickly onboarding new employees,” Orlando said. “This expansion will also allow our IT, customer service, and marketing personnel to return to the office, while still being able to adhere to social distancing guidelines.”
Value Creation
“After careful consideration, we are pleased to have reached an agreement that reflects the remarkable value creation Collectors Universe has achieved through its consistent execution during these challenging times,” Collectors Universe Chairman A.J. “Bert” Moyer said in a statement.
Moyer was the former chief financial officer at two well-known companies formerly based in Orange County, Allergan and Western Digital.
Collectors’ largest shareholders include Renaissance Technologies LLC, which owns 8.9%, and BlackRock Inc., which owns 6.4%.
The transaction is expected to close in the first calendar quarter of 2021. Houlihan Lokey is financial advisor and Wilson Sonsini Goodrich & Rosati is legal counsel. Allen & Company LLC is serving as financial advisor to the Investor Group and Sullivan & Cromwell LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are serving as legal counsel.
