Senator Investment Group LP and Cannae Holdings Inc. have initiated a process to call a special meeting of shareholders with the aim of removing and replacing a majority of the board members of property information and analytics provider CoreLogic.
The move comes after CoreLogic’s board unanimously rejected an offer from Senator and Cannae to acquire all of its outstanding common shares for $65.00 per share.
CoreLogic argued that the offer significantly undervalued the company, raised serious regulatory concerns, and was not of value to shareholders.
But the two investors, which collectively own 15% of CoreLogic, claim that the firm is acting against the best interests of its shareholders.
They argue that CoreLogic has refused to seriously consider the offer, and has relied on a “smokescreen” of regulatory concerns and “poison pill” defense tactics.
Now, in a new letter to shareholders, Senator and Cannae have said they plan to oust most current members of CoreLogic’s board and replace them with nine independent directors.
“Unfortunately, CoreLogic and its advisors have … chosen to employ a series of defensive maneuvers aimed at eliminating this opportunity,” Senator and Cannae stated in a joint letter to shareholders.
“Tactics have included rejecting our proposal without speaking to us, increasing the Company’s share count in order to dilute our beneficial ownership below the 10% threshold required to call a Special Meeting, adopting a poison pill to delay our calling a Special Meeting, inciting regulatory scrutiny, obfuscating organic growth in order to support aggressive projections, immediately issuing press releases following the only private communications we have had, and summarily rejecting our request for access to diligence materials that would enable us to evaluate the possibility of increasing our proposal.”
The investors further noted that CoreLogic has enjoyed protection from acquisition offers until now due to the placement of a decade-long purchase right in its founding documents.
For its part, CoreLogic maintains that it undertook a thorough review of the acquisition proposal, and concluded that it significantly undervalued the company and was not in the best interests of its other shareholders.
“The Board continues to believe Senator and Cannae’s proposal significantly fails to provide appropriate value to our shareholders and does not reflect our strong multi-year outlook for the business,” Chairman Paul Folino said in response to the new letter.
“The proposal also does not account for our substantial return of capital, including a 50% dividend increase and repurchase of $1 billion of shares by 2022. Further, CoreLogic continues to gain momentum as evidenced by the strong results posted last week in which our organic growth rose to 5%, margins increased by 400 basis points and we achieved record levels of free cash flow,” Folino continued.
“As a result, our Board is unanimous and highly confident in its belief that CoreLogic will be able to deliver significantly more value to shareholders than this opportunistic proposal. We will continue to provide full transparency into our business so all our shareholders can participate in CoreLogic’s substantial value creation potential.”
But Senator and Cannae say CoreLogic has refused to provide access to due diligence materials that would enable them to understand product-level profitability and growth, and to adjust the value of their acquisition offer, if necessary.
“It is surprisingly difficult for shareholders to determine the true organic growth rate of CoreLogic,” they noted, suggesting that the firm has intentionally overstated its organic growth, while obscuring unfavourable tailwinds.
Senator and Cannae had previously said they expected a merger agreement with CoreLogic to be possible within one month of gaining due diligence access.
As such, they acknowledged that calling a special meeting to replace directors “introduces delay and is a suboptimal outcome for all.”
The independent directors proposed by Senator and Cannae include: W. Steve Albrecht, Gunnel Endowed Professor in the Marriott School of Management at Brigham Young University; Martina Lewis Bradford, Founder, President, and CEO of Palladian Hill Strategies; Gail Landis, a Founding Partner of Evercore Asset Management, LLC and Morningstar board member; and Wendy Lane, Chairman and Founder of Lane Holdings, Inc.
The list also includes: Ryan McKendrick, former President and CEO of AMCOL International; Katherine Rabin, CEO at Glass, Lewis & Co; Sreekanth Ravi, Co-Founder and Executive Chairman of the Board of RSquared; Lisa Wardell, Chairman and CEO of Adtalem Global Education Inc.; and Henry W. Winship, President and Founder of Pacific Point Capital.