Compass Diversified (CODI) announced that it has completed its planned tax reclassification. Effective Wednesday, Compass Diversified Holdings will be treated as a corporation for U.S. federal income tax purposes.
“Simplifying our tax structure is an important milestone for our company that we believe will position CODI for continued success and new opportunities,” said Elias Sabo, CEO, CODI. “We expect that being treated as a corporation will unlock substantial value for our shareholders due to several key benefits. In particular, we expect the removal of certain administrative requirements for our shareholders will allow us to expand our shareholder base and improve the likelihood of our stock’s inclusion within stock indices. We also anticipate having a significantly lower cost of capital moving forward. With the lowest cost of capital among our peers, we have built a competitive advantage in the marketplace that we believe will be a key differentiator as we continue to seek opportunistic acquisitions and manage leading businesses. Our Board and talented management team are excited to continue leveraging our permanent capital structure to drive long-term shareholder value and reach an even larger group of investors.”
CODI expects that being treated as a corporation for U.S. federal income tax purposes will increase share liquidity with a broadened pool of investors; reduce the weighted average cost of capital; create more flexibility in investment decisions; improve the likelihood of CODI’s stock’s inclusion within stock indices; improve the company’s profile with ratings agencies; and reduce administrative cost.
As previously announced, to offset a portion of the tax liability to the shareholders as a result of the election to cause the Trust to be treated as a corporation for U.S. federal income tax purposes, the Board declared a special cash distribution of $0.88 per share on the Trust’s common shares (the “Common Shares”). The distribution on the Common Shares is payable on September 7, 2021 to all holders of record of Common Shares as of the close of business on August 31, 2021.
CODI’s business holdings include 5.11, Boa Technology, Marucci Sports and Velocity Outdoor in the active lifestyle space. Other businesses include Advanced Circuits, Arnold Magnetic Technologies, Ergobaby, Foam Fabricators, and Sterno.
Photo courtesy CODI/5.11
