An activist investment firm is targeting Cannae Holdings Inc., saying it may nominate four directors for the investment company spun off from Fidelity National Financial Inc.
Carronade Capital sent a letter to Cannae’s board of directors March 20 saying the company is underperforming and it will take its case to shareholders and nominate the four potential board members if changes are not enacted.
“Carronade Capital believes Cannae’s total shareholder return and corporate governance can be meaningfully improved, and significant opportunities exist to unlock substantial value for all shareholders,” the letter said.
“Despite a handful of successful investments in the past, the current portfolio of private investments is consistently marked at cost and the remaining investments in public equities have destroyed approximately $900 million of value.”
Cannae was spun off from Jacksonville-based title insurance company Fidelity in 2017, with its business consisting of nontitle investments that had been held by Fidelity.
The company is headquartered in Las Vegas, where Fidelity Chairman and Cannae CEO Bill Foley relocated after being granted a National Hockey League expansion franchise in that city.
Connecticut-based Carronade said it owns 2.9 million Cannae shares, which would be about 4.6% of the company’s stock.
Carronade is seeking to replace four of Cannae’s 10 directors who would be up for reelection at this year’s annual meeting.
Cannae has not filed its proxy statement for that meeting but last year’s proxy said four directors who would be up for reelection in 2025 include two former Fidelity executives, Erika Meinhardt and Frank Willey.
Another director up for reelection this year is Jim Stallings, managing partner of Jacksonville-based investment firm PS27 Ventures.
Cannae’s investment portfolio includes stakes in Jacksonville-based Dun & Bradstreet Holdings Inc. and London-based Paysafe Ltd., which has its North American headquarters in Jacksonville.
Carronade’s letter was sent before Dun & Bradstreet announced March 24 it agreed to a $7.7 billion buyout offer from investment firm Clearlake Capital Group.
Dun & Bradstreet and Paysafe were both part of deals involving Foley. An investment group led by Foley acquired Dun & Bradstreet in 2019, and then took it public in 2020.
Paysafe went public in 2021 by merging with a special purpose acquisition company formed by Foley.
Cannae’s private investment portfolio is led by Black Knight Football Club, a company that has invested in European soccer clubs including British Premier League team AFC Bournemouth.
In a Cannae news release responding to Carronade, Foley defended the company’s performance.
“We remain optimistic on the outlook for our portfolio companies and their significant embedded value,” Foley said.
“We also remain focused on returning capital to shareholders and will utilize capital from the sell-down of existing public portfolio company holdings to further buy back our stock, given our continued commitment to reduce Cannae’s share price discount to net asset value.”
After meeting with management, Oppenheimer analyst Ian Zaffino said in a March 7 research note that Cannae is transitioning away from investments in public companies “and the potential sale of Dun & Bradstreet could accelerate this process.”
“Once Cannae’s public investments are reduced, we believe investors will begin to appreciate its private holdings, including Black Knight Football Club,” he said.
RBC Capital Markets analyst Kenneth Lee said in a March 21 note Carronade’s push could be a positive for Cannae’s stock.
“Carronade’s recommendations seem reasonable to us; key area of pushback from Cannae could be whether capital allocation priorities would be to return substantially all the proceeds from portfolio monetizations or re-invest some of the proceeds in new, private investments,” Lee said.
Jacksonville-based health care technology firm Forcura announced March 19 it merged with Medalogix, a Nashville, Tennessee-based firm that also provides technology for health care.
Boston-based private equity firm Berkshire Partners, which is not affiliated with investment firm Berkshire Hathaway, is the majority owner of the combined organization.
No name was announced for the merged company and terms of the deal were not announced, but The Wall Street Journal reported the combined company is valued at just under $1 billion.
The companies said in a news release the merger will allow them to create a leading post-acute care technology platform.
“We look forward to our next chapter with Medalogix, where we sustain our commitment to empower better patient care and elevate the role of post-acute providers across the healthcare continuum,” Forcura founder and CEO Craig Mandeville said in the release.
Mandeville will move into a board role and Annie Erstling has been named Forcura’s president and chief transformation officer.
Shoe Carnival Inc. announced a transformation of the company to convert about half of its stores to another brand it owns, Shoe Station.
The Evansville, Indiana-based company controlled by former Jacksonville Jaguars owner Wayne Weaver acquired Shoe Station in December 2021, the first acquisition in Shoe Carnival’s then 43-year history.
Shoe Station had 21 stores in the Southeast when it was acquired but it has grown to 57 after Shoe Carnival began testing a banner switch initiative in September.
The banner switch test was so successful that Shoe Carnival announced a major expansion of the plan as it reported year-end earnings March 20.
The company currently has 346 Shoe Carnival stores and 28 Rogan’s stores, a brand it acquired last year, in addition to the 57 Shoe Stations.
However, the company said two years from now, it plans to have 218 Shoe Station locations, representing 51% of its total store fleet.
The company has two Northeast Florida Shoe Carnival stores but did not respond to an email about Shoe Station plans for the Jacksonville area.
In its conference call with analysts, CEO Mark Worden said Shoe Station targets different customers than Shoe Carnival, which is known for its carnival-like atmosphere with in-store promotions.
“Shoe Station is our premium retail banner, attracting higher-income households, providing customers the top branded assortments for both nonathletic and athletic branded footwear, high levels of service and a welcoming contemporary shopping environment,” Worden said.
“Since we acquired Shoe Station in 2021, we’ve been evaluating customer analytics, market data and developing strategies to expand the chain beyond its roots in the Gulf region of America,” he said.
Worden said the company tested the initiative by rebranding 10 Shoe Carnival locations as Shoe Station, and the results exceeded its expectations.
“They generated sales over 10% higher than Shoe Carnival, expanded margins, attracted higher-income households, converted new customers, and ultimately delivered a double-digit increase in profits, excluding closing and opening costs,” he said.
“We originally planned for 25 rebanners this year and then a gradual expansion over many years. We now believe that is too conservative an approach based on the customer response, financial accretion, and the continued headwinds we anticipate the lower-income households face this year.”
Weaver is chairman of Shoe Carnival and its largest shareholder. He and his wife, Delores Barr Weaver, control 33.8% of the stock.
The company reported sales rose 2.3% in the fiscal year ended Feb. 1 to $1.203 billion, with adjusted earnings rising by 2 cents a share to $2.72.