Tickers in this Article: BTN, CRBN.OB, C.CXS, TRLG
Last August, I wrote an article recommending Ballantyne Strong (AMEX:BTN), an Omaha-based distributor of digital cinema equipment. While discussing the merits of the article with Rob Rinderman, Managing Director of New York investor relations firm Jaffoni & Collins, Rinderman mentioned that one of its other clients was located in Toronto, where I live.

Also a micro cap, Counsel RB Capital (OTCBB:CRBN) deals with distressed and capital surplus assets. Its majority owner, Counsel Corporation (TSE:C.CXS), has its hands in some interesting businesses. Don't be fooled by its lack of size though. CEO Allan Silber's been at the helm since 1979 and is a seasoned investor. If you like your investments a little off the beaten track, Counsel is just the ticket. (For related reading, see How To Evaluate A Micro-Cap Company.) Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Operating Businesses
Counsel owns about 76% of Counsel RB Capital, that together with former bankruptcy attorneys Adam and Jonathan Reich, created Counsel RB Capital, LLC in 2009 to operate an industrial liquidation business.

On Nov. 14, 2011, Counsel announced its third-quarter results, which saw revenues for the first nine months of the year grow 125% to $16.8 million with operating income increasing around 34% to $4.7 million. Co-CEO Adam Reich stated in the announcement, "We continue to make solid progress toward our goal of becoming a unique, full-service distressed and surplus capital assets solutions provider." With a current market capitalization of roughly $37.7 million, Counsel's approximate 76% interest is worth around $28.7 million.

In May 2011, Counsel completed its acquisition of Street Capital Financial Corporation, a large originator of household mortgages in the Canadian mortgage broker distribution channel. Since opening its doors in 2007, it's originated over $7.8 billion in home mortgages through the end of September. Its revenue for the 11-month period ended Sept. 30, 2011, was $54.6 million with pre-tax income of $9.1 million. Street Capital's senior officers stayed on after the acquisition and own approximately 5.5% of Counsel with the potential to achieve additional cash payments over the next eight years based on meeting certain profit targets.

Private Equity

Counsel owns 100% of Knight's Bridge Capital Partners, a private equity firm it founded in 2007 to manage its private equity investments. In March 2008, Counsel put $15 million ($5 million from senior management) into Knight's Bridge Capital Partners Fund 1, along with $47 million in outside capital commitments, to make equity investments up to $10 million in small and mid-market businesses in Canada and the U.S.

Sixty percent of the funds have been invested in companies like Polaroid, the Authentic Brands Group and Ellen Tracy. Probably the two most interesting investments are those made in The Works Burger Bistro and shirt-maker Robert Graham.

In September 2010, Knight's Bridge acquired a 35.7% equity interest in the Ottawa-area burger franchise for about $1.36 million. A blog about burgers, recently listed The Works as one of 12 burger chains to watch in 2012; the only Canadian chain to make the list. Robert Graham was acquired by Tengram Capital for somewhere north of $50 million, according to the New York Post.

However, Counsel said in its third-quarter report that it acquired about 18% interest in Robert Graham for roughly $4.2 million, pegging the entire purchase at around $23 million. Tengram hired former True Religion Apparel (Nasdaq:TRLG) President Michael Buckley as Robert Graham's CEO. Look for the opening of 40 retail stores in the coming years. (To learn more, read What Is Private Equity?)

The Bottom Line
There are a lot of moving parts to Counsel and I'd recommend you do your homework before considering an investment. That said, its asset liquidation (Counsel RB Capital) and mortgage lending (Street Capital Financial) businesses combined, are probably worth close to $59 million, its current market cap. Therefore, you're essentially getting the private equity investments and real estate for nothing. (For additional reading, check out A Primer On Private Equity.)

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At the time of writing, Will Ashworth did not own shares in any of the companies mentioned in this article.


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