CompoSecure’s Spin-Off of Resolute Holdings: A Strategic Move for Future Growth (CMPO, RHLD)

CompoSecure, Inc. (Nasdaq: CMPO), a leader in metal payment cards and authentication solutions, has announced the spin-off of Resolute Holdings Management, Inc. (RHLD). This move aims to establish Resolute Holdings as a separate, publicly traded asset management firm dedicated to driving long-term investment strategies and acquisitions.

With a planned distribution date of February 28, 2025, CompoSecure shareholders will receive shares of RHLD on a pro rata basis. Additionally, CompoSecure has expanded its share repurchase program from $40 million to $100 million, signaling strong confidence in its future.

This article provides a comprehensive breakdown of the spin-off, covering key dates, trading impacts, shareholder considerations, and the future of both companies.

Key Highlights of the Spin-Off

Parent Company: CompoSecure, Inc. (Nasdaq: CMPO)
New Entity: Resolute Holdings Management, Inc.
Ticker Symbol: RHLD (Nasdaq)
Record Date: February 20, 2025
Distribution Date: February 28, 2025
Share Distribution Ratio: 1 RHLD share for every 12 CMPO shares owned
Trading Start Date for RHLD: February 20, 2025 (when-issued trading)
Transaction Type: Taxable for both CompoSecure and its shareholders
Profitability Expectation for RHLD in FY 2025: Limited as it establishes operations

Why is CompoSecure Spinning Off Resolute Holdings?

The spin-off is designed to create a dedicated investment management platform that will drive long-term value for both entities. By separating its investment functions from its core payment technology business, CompoSecure aims to:

Enhance its focus on core operations related to metal payment cards and security solutions
Allow Resolute Holdings to operate independently, focusing solely on capital allocation and acquisitions
Optimize financial structures, enabling each company to operate with greater flexibility

Strategic Benefits of the Spin-Off

More Efficient Capital Allocation – Resolute Holdings will manage capital more effectively, ensuring funds are allocated to the highest-value opportunities.

Stronger M&A Execution – With Resolute Holdings solely focused on mergers and acquisitions, it can pursue deals that accelerate growth for CompoSecure and other managed entities.

Operational Independence – CompoSecure’s leadership can streamline its payment card business, while RHLD builds a dedicated asset management strategy.

Potential for Long-Term Shareholder Returns – The spin-off creates two specialized companies, increasing the likelihood of higher valuations over time.

Resolute Holdings' Management Agreement with CompoSecure

After the spin-off, Resolute Holdings will enter into a Management Agreement with CompoSecure, under which it will receive a quarterly management fee equivalent to 2.5% of CompoSecure’s Adjusted EBITDA. This ensures that Resolute Holdings remains involved in overseeing strategic financial decisions, including:

Capital allocation
Operational practices
M&A execution

This structure enables CompoSecure to benefit from Resolute Holdings’ expertise while maintaining operational independence.

What This Means for CompoSecure Shareholders

For current CMPO shareholders, the spin-off brings a mix of opportunities and challenges.

Opportunities:

New Investment ExposureShareholders gain exposure to Resolute Holdings, an asset management firm with potential for future growth through acquisitions.
Pro Rata Distribution of SharesShareholders receive 1 RHLD share for every 12 CMPO shares owned as of February 20, 2025.
Expanded Stock Buyback ProgramCompoSecure is increasing its stock repurchase program to $100 million, demonstrating confidence in its post-spin-off financial outlook.

Challenges:

Tax ImplicationsUnlike some spin-offs that qualify for tax-free treatment, this transaction is taxable. Shareholders should consult with a tax advisor to understand their potential tax liabilities.
Short-Term Profitability Concerns for RHLDResolute Holdings expects limited profitability in its first year as it builds infrastructure and expands operations.

Trading & Market Impact

RHLD Trading Timeline

February 20, 2025 – "When-issued" trading begins for RHLD on Nasdaq.
February 28, 2025 – Regular trading for RHLD begins on Nasdaq.

Impact on CMPO Stock

Between February 20 and February 27, CMPO stock will trade in two separate markets:

Regular-way Market ("CMPO") – Trades with the right to receive RHLD shares.
Ex-distribution Market ("CMPOV") – Trades without the right to receive RHLD shares.

Investors should consult their broker before selling CMPO shares during this period to understand whether they will still receive RHLD shares.

Financial Performance & Future Outlook

CompoSecure’s FY 2024 Preliminary Financials

Net Sales: $420.6 million (in line with guidance)
Net Income: ($89.2) to ($87.7) million
Adjusted EBITDA: $149.4 to $151.4 million

What to Expect Post-Spin-Off

CompoSecure (CMPO): Will continue its focus on payment card and authentication technology, backed by a robust financial outlook and share buyback program.
Resolute Holdings (RHLD): Will pursue M&A and asset management, with a goal of long-term value creation through strategic acquisitions.

Who’s Leading Resolute Holdings?

Resolute Holdings will be led by experienced executives with deep expertise in investment management and operational strategy:

David Cote – Executive Chairman
Tom Knott – Chief Executive Officer
Board Members Include: John Cote, Joseph DeAngelo, Roger Fradin, Paul Galant, Brian Hughes, Mark James, Krishna Mikkilineni, and Jane Thompson

Their strategic expertise is expected to position RHLD for sustainable long-term growth.

Conclusion: What’s Next for CompoSecure & Resolute Holdings?

CompoSecure’s spin-off of Resolute Holdings is a strategic decision aimed at unlocking value for shareholders.

CompoSecure will streamline its operations, while Resolute Holdings will focus on investment strategies.

Key Takeaways:

CompoSecure shareholders will receive RHLD shares on a pro-rata basis.
The transaction is taxable, and investors should prepare accordingly.
RHLD will focus on M&A and asset management, with long-term potential despite initial profitability challenges.
CMPO’s expanded $100 million stock buyback program reflects confidence in its future.

Investors should evaluate the long-term potential of both companies and monitor trading activity as RHLD enters the market.

FAQs

What is the record date for receiving RHLD shares?

February 20, 2025.

How many RHLD shares will I receive?

One RHLD share for every 12 CMPO shares owned.

Is the spin-off taxable?

Yes, it is taxable for both CompoSecure and its shareholders.

When will RHLD start trading?

When-issued trading starts on February 20, 2025, with full trading beginning February 28, 2025.

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