8-K: Bimini Capital to Acquire 80% of Tom Johnson Investment Management

Bimini Capital Management, Inc. announced an agreement to acquire an 80% equity interest in Tom Johnson Investment Management, LLC, a registered investment adviser, aiming to diversify its asset management portfolio.

Summary

• Bimini Advisors Holdings, LLC, an indirect wholly owned subsidiary of Bimini Capital Management, Inc., entered into an agreement to purchase 80% of the fully diluted equity interests of Tom Johnson Investment Management, LLC (TJIM).
• The purchase price will be 2.5 times 80% of TJIM's revenue for the fiscal year ended December 31, 2025, paid in cash at closing.
• If the purchase price exceeds $12,000,000, the excess will be paid in three equal annual installments on the first, second, and third anniversaries of the Closing, plus 5% interest compounded annually.
• If the excess is less than $1,000,000, it will be paid on or before the first anniversary of the Closing.
• Richard's Trust will retain a 20% equity interest in TJIM, with put and call rights exercisable on the later of the third anniversary of the Closing or Richard Parry ceasing employment, at a price determined by the same formula, subject to TJIM reporting an EBITDA margin of at least 30.0%.
• Completion of the transaction is subject to customary conditions, including financial, legal, and regulatory due diligence, and receipt of all necessary regulatory, contractual, and client consents.
• Richard Parry will enter into a new three-year employment agreement with TJIM, and other current management members are expected to sign new employment agreements.
• TJIM currently manages approximately $1.6 billion in assets across equity and fixed income markets.

Sentiment

Score: 8

Explanation: The filing announces a strategic acquisition that is expected to significantly diversify Bimini's business and provide growth opportunities for TJIM. Management comments are positive, highlighting synergies and benefits for both entities, including staff retention and access to capital markets. While there are standard closing conditions and indemnification clauses, the overall tone and stated objectives indicate a strong positive outlook for the transaction.

Positives

• The acquisition is expected to enhance both Bimini and TJIM, transitioning Bimini into a more diverse asset management firm.
• TJIM will gain access to Bimini's experienced public company management, governance, and infrastructure.
• TJIM will benefit from Bimini's capital markets expertise and banking relationships with major Wall Street banks.
• The transaction offers potential for TJIM to raise assets under management in public markets and increase name recognition through its affiliation with Bimini and Orchid Island Capital, Inc.
• The existing owners of TJIM will retain a 20% ownership interest, aligning their incentives with future growth.
• Current TJIM staff and investment management team are intended to be retained, with opportunities for certain members to become equity owners, fostering retention and alignment.
• Management of the respective assets of TJIM and Bimini will remain under their current management teams, avoiding commingling of responsibilities.

Negatives

• The purchase price calculation is based on 2025 revenue, introducing some uncertainty until that figure is finalized.
• A significant portion of the purchase price may be deferred over three years if it exceeds $12,000,000.
• The closing condition requires TJIM's Closing Date 2026 Pro Forma Revenue to be at least 90% of Fiscal Year 2025 Revenue; failure to meet this could lead to renegotiation or termination.
• Client consents are required for the assignment of Investment Contracts, and a refusal by clients representing more than 10% of Fiscal Year 2025 Revenue could trigger renegotiation or termination.
• Seller Parties are jointly and severally liable for indemnification obligations, including for pre-closing taxes, liabilities, and breaches of representations and warranties, with certain caps and an escrow amount.

Risks

• Failure to obtain all necessary regulatory, contractual, and client consents could prevent or delay the closing of the transaction.
• If TJIM's Closing Date 2026 Pro Forma Revenue falls below 90% of Fiscal Year 2025 Revenue, the parties may need to renegotiate economic terms or terminate the agreement.
• The occurrence of a Material Adverse Effect on TJIM between the Effective Date and the Closing Date could lead to termination of the agreement.
• Seller Parties face indemnification liabilities for inaccuracies in representations and warranties, breaches of covenants, pre-closing taxes, undisclosed liabilities, and issues related to the Paycheck Protection Program or other COVID Laws.
• Future put/call options on the retained 20% interest are contingent on TJIM's EBITDA margin of at least 30.0%, introducing performance risk for the valuation of that interest.

Future Outlook

Bimini Capital Management intends for this acquisition to transition the company into a pure asset management firm with a more diverse mix of assets under management. The current staff and investment management team of TJIM will be retained, with opportunities for certain members to become equity owners, aiming to incentivize long-term growth and client service. The management of assets for both Bimini and TJIM will remain separate.

Management Comments

• Robert E. Cauley, Chairman and Chief Executive Officer of Bimini Capital Management, Inc., stated: "We are excited to announce this transaction and believe it will enhance both Bimini and TJIM."
• Robert E. Cauley also noted: "This transaction will provide TJIM with: (i) access to Bimini's experienced public company management, governance, and infrastructure; (ii) Bimini's capital markets expertise and access (including Bimini's banking relationships with major banks across Wall Street); and (iii) potential to raise assets under management in public markets."
• Richard H. Parry, President and Chief Investment Officer of TJIM, added: "This strategic step will facilitate staff retention and provide our staff with ongoing incentives for both growth and sustaining the high level of services to our clients over the long term. I personally look forward to working with Bob and Bimini in the years to come to address this ever-changing investment service arena."

Industry Context

Bimini Capital Management, traditionally specializing in residential mortgage-related securities, is strategically diversifying its asset management portfolio by acquiring Tom Johnson Investment Management, which manages equity and fixed income assets. This move positions Bimini as a broader 'pure asset management firm.' The affiliation with Orchid Island Capital, Inc., a NYSE-listed REIT externally managed by Bimini Advisors, is expected to provide TJIM with enhanced name recognition and access to public market infrastructure, a common strategy for smaller, privately held investment advisers seeking growth and institutional backing.

Comparison to Industry Standards

• TJIM's AUM of approximately $1.6 billion positions it as a mid-sized investment adviser, a common target for larger firms seeking diversification or scale.
• The purchase price multiple of 2.5 times revenue is within the typical range for acquisitions of investment advisory firms, which can vary widely based on factors like AUM growth, client retention, profitability, and asset class focus.
• The requirement for client consents for assignment of investment advisory contracts is a standard regulatory compliance step under the Investment Advisers Act of 1940, ensuring client protection during ownership changes.
• The retention of key management (Richard Parry with a three-year employment agreement) and incentives for staff (potential equity ownership, bonus pool) are common practices in asset management M&A to ensure continuity and minimize client attrition.
• The 30% EBITDA margin condition for the put option on the retained 20% interest is a specific performance benchmark, indicating a focus on profitability for future valuation.

Management Changes

Corporate Governance

Related Party Transactions

• The acquisition involves the purchase of 80% of TJIM from Richard Parry and Gayle Parry (Seller Parties), who are also beneficial owners and key management of TJIM.
• Richard Parry will enter into a new three-year employment agreement with TJIM as a condition of the closing.
• Richard's Trust, associated with Richard Parry, will retain a 20% equity interest in TJIM, subject to future put/call options.

Stakeholder Impact

• **Bimini Shareholders**: Expected to benefit from strategic diversification into a broader asset management firm, leveraging public company infrastructure for growth.
• **TJIM Seller Parties (Richard and Gayle Parry)**: Receive significant cash consideration for 80% of their ownership, retain a 20% interest with future liquidity options, and commit to ongoing management roles and restrictive covenants.
• **TJIM Employees**: Current staff and investment management team are expected to be retained, offered new employment agreements, and potentially equity ownership, providing stability and incentives.
• **TJIM Clients**: Required to provide consent for the assignment of their Investment Contracts, ensuring transparency and choice during the ownership transition. Management of client assets will remain under TJIM's current team.
• **Regulatory Authorities**: The transaction requires various regulatory consents, indicating ongoing oversight and compliance requirements.

Next Steps

• Complete financial, legal, and regulatory due diligence.
• Obtain all necessary regulatory, contractual, and client consents.
• Richard Parry to enter into a new three-year employment agreement with TJIM.
• Other TJIM management members are expected to enter into new employment agreements.
• Closing of the transaction, expected at the end of the first quarter of 2026.
• Seller Parties to deliver TJIM's 2025 Financial Statements and Revenue Certificate by March 1, 2026.
• Buyer to establish a bonus pool for TJIM employees covering 2026-2028, contingent on specific EBITDA margin targets.
• Put/call options on the retained 20% interest become exercisable on the later of the third anniversary of the Closing or Richard Parry ceasing employment.

Key Dates

Recommendation

The acquisition of Tom Johnson Investment Management by Bimini Capital Management is a significant strategic move aimed at diversifying Bimini's asset base and transitioning it into a broader asset management firm. This is generally a positive long-term development. However, the transaction is still subject to several closing conditions, including regulatory and client consents, and a revenue performance threshold for TJIM. While the outlook is positive, the immediate impact on Bimini's share price is speculative until the deal closes and the financial integration and synergies materialize. A 'hold' recommendation is appropriate to observe the successful completion of the acquisition and initial integration, as well as the realization of the anticipated benefits and the finalization of financial terms based on TJIM's 2025 revenue.

Keywords

Asset Management, Acquisition, Investment Adviser, SEC Filing, Corporate Governance, Financial Services, AUM, M&A, Bimini Capital Management, Tom Johnson Investment Management, Strategic Diversification