CompoSecure's shares advanced early Tuesday as the company announced plans to spin off its newly formed subsidiary, Resolute Holdings Management, into a separate publicly traded entity. The maker of metal payment cards aims to increase value-enhancing acquisitions and inorganic growth with the separation of its alternative asset management platform unit, it said in a late Monday statement.
CompoSecure's investment team and its associated costs will move to Resolute upon completion of the spin-off. The spin-off, which requires final approval from the company's board of directors, is expected to be completed during the first quarter of 2025. Resolute Holdings is anticipated to trade on the Nasdaq under the RHLD ticker upon separation.
CompoSecure's stock rose 4.5% in premarket activity. CompoSecure's subsidiary, CompoSecure Holdings, will enter into a management agreement with Resolute as part of the separation plan. Under the terms, Resolute Holdings will receive a quarterly management fee in cash equal to 2.5% of CompoSecure's adjusted earnings before interest, taxes, depreciation and amortization for the last 12 months.
Resolute will provide CompoSecure's business with certain services, including oversight of its capital allocation strategy and operational practices. CompoSecure Executive Chairman David Cote will serve in the same role at Resolute, while director Tom Knott will assume the post of chief executive of the company.
CompoSecure expects Resolute to have "limited profitability" in the 2025 fiscal year as it establishes operations and develops its investment and operating team. The spin-off will be on a pro-rata basis and is expected to be taxable for both CompoSecure and all existing shareholders, the company said..