DEFA14A: Cannae Holdings Q2 2025: Portfolio Rebalance & Shareholder Returns

Cannae Holdings reports significant progress on its strategic plan, rebalancing its portfolio, returning capital to shareholders, and making opportunistic investments.

Summary

• The strategic plan focuses on rebalancing the portfolio away from public investments, making opportunistic investments, and returning capital to shareholders.
• The stock closed at $19.88 on August 9, 2025, trading at a 26.6% discount to NAV per share, a significant narrowing from nearly 40% in February 2024.
• The sale of Dun & Bradstreet (D&B) is expected to close in Q3 2025, generating approximately $630 million in cash proceeds ($90 million from pre-closing sales and $540 million at closing).
• Approximately $500 million of D&B proceeds are earmarked for shareholder benefit: $300 million for share repurchases, $141 million to repay the margin loan, and $60 million for future quarterly dividends.
• Since February 2024, approximately $1.1 billion of public portfolio stakes have been sold, reducing public company shares from 63% to an expected 22% of assets post-D&B sale.
• Cannae repurchased 7.6 million shares (approximately 12% of outstanding shares) for $150 million since May, at an average price of $19.71 per share and a 30% discount to NAV.
• The quarterly dividend was increased by 25% to $0.15 per share, contributing to a total of approximately $414 million returned to shareholders through buybacks and dividends since February 2024.
• An additional 30% stake in JANA is expected to be acquired for $67.5 million in Q3, bringing total ownership to 50%, alongside a $30 million investment in JANA funds.
• Black Knight Football (BKFC) completed a $130 million capital raise, with Cannae committing $50 million, maintaining 44% ownership in the approximately $563 million capitalized entity.
• BKFC capital will fund operating expenses, the AFC Bournemouth (AFCB) Stadium acquisition and renovation, the Moreirense FC acquisition, and other potential strategic team investments.
• AFC Bournemouth finished 9th in the Premier League in the 2024/2025 season with a club record 56 points, demonstrating double-digit revenue growth this fiscal year and an 81% increase in Match Day and commercial revenue since acquisition.
• AFCB completed significant player sales, including Dean Huijsen to Real Madrid for approximately $68 million and Milos Merkez to Liverpool for approximately $52 million, with an expected sale of Ilya Zabarnyi to Paris Saint-Germain for approximately $74 million plus $5 million in add-ons, totaling nearly $200 million in transfer fees and approximately $130 million in profit.
• AFCB acquired Vitality Stadium and plans a two-phase renovation to increase capacity from 11,000 to 17,000 by the 2026/2027 season, expecting mid-teen unlevered returns.
• FC Lorient was promoted to Ligue 1, and Hibernian FC finished 3rd in the Scottish Premiership, qualifying for the Europa League.
• BKFC acquired a 70% interest in Moreirense FC (Portugal's Primeira Liga) for $18 million ($4 million upfront, $14 million over time) and established a Strategic Affiliation Agreement with Orlando City FC (MLS).
• Alight reported Q2 2025 total revenue from Continuing Operations of $528 million (2% decrease YoY) and a net loss of $1 billion, including a $983 million non-cash goodwill impairment.
• Alight's Adjusted EBITDA increased 21% YoY to $127 million, exceeding consensus, with an Adjusted EBITDA margin of 24.1% (up 460 basis points). Free cash flow in H1 2025 was $102 million, a significant improvement.
• Alight lowered its full-year 2025 revenue guidance to a midpoint of $2.3 billion but reaffirmed its Adjusted EBITDA guidance midpoint of $633 million.
• Watkins delivered mid single-digit net sales growth and high single-digit EBITDA growth in H1 2025, expecting 2025 Adjusted EBITDA of approximately $20 million.
• The Restaurant Group's Q1 total operating revenue was $110 million (6.6% lower YoY); Ninety Nine Restaurant and Pub's same-store sales were down less than 1%, outperforming the casual dining segment.
• O'Charley's faced significant headwinds, including a double-digit decline in same-store sales, leading to the closure of six lowest-performing locations.
• Consolidated operating expenses were $171 million in Q2 2025, up $30 million YoY, driven by management transition expenses.
• Net recognized losses were $76 million in Q2 2025, primarily due to the non-cash impairment of the Alight investment.
• Corporate cash and short-term investments totaled $42 million, with debt of $188 million ($141 million margin loan, $47.5 million term note); the margin loan is expected to be repaid upon D&B closing.
• The 2025 Annual Meeting date will be announced after the D&B closing, expected later this fall.

Sentiment

Score: 7

Explanation: The company is actively executing its strategic plan, demonstrating significant progress in portfolio rebalancing and returning capital to shareholders. Key investments like Black Knight Football are performing exceptionally well, with record team achievements and profitable player sales. While there are challenges with Alight's impairment and the restaurant segment, the overall direction and management's proactive measures are positive, indicating a strong strategic trajectory despite some operational headwinds.

Positives

• The stock price discount to NAV narrowed significantly to 26.6% from nearly 40% when the strategic plan was announced in February 2024.
• Approximately $414 million in total capital has been returned to shareholders through share buybacks and dividends since February 2024.
• The quarterly dividend was increased by 25% to $0.15 per share, providing consistent capital return to long-term shareholders.
• 7.6 million shares (approximately 12% of outstanding) were repurchased for $150 million at an average 30% discount to NAV, driving net asset value accretion.
• The portfolio is being strategically rebalanced, with public company shares expected to decrease from 63% to 22% of assets after the D&B sale.
• AFC Bournemouth achieved a club record 9th place finish in the Premier League (2024/2025 season) with 56 points, demonstrating strong on-field success.
• AFC Bournemouth reported double-digit revenue growth this fiscal year and an 81% increase in Match Day and commercial revenue since acquisition.
• AFC Bournemouth generated nearly $130 million in profit from player sales, including high-value transfers to top European clubs like Real Madrid and Liverpool.
• The planned renovation of Vitality Stadium for AFC Bournemouth is expected to deliver mid-teen unlevered returns on invested capital.
• FC Lorient secured promotion to Ligue 1, and Hibernian FC qualified for the Europa League for the first time since the 2020/2021 season.
• Alight's Adjusted EBITDA increased 21% year-over-year to $127 million, exceeding consensus estimates, and its Adjusted EBITDA margin improved by 460 basis points to 24.1%.
• Alight generated $102 million of free cash flow in the first half of 2025, a strong improvement over $26 million in the first half of 2024.
• Watkins delivered mid single-digit growth in net sales and high single-digit growth in EBITDA in the first half of 2025, with expectations for further improvement.
• Ninety Nine Restaurant and Pub outperformed the casual dining segment, with same-store sales down less than 1% compared to a 2% decline for the industry segment.
• The term note's fixed interest rate was lowered by nearly 30%, and its maturity was extended to 2030, improving debt terms.

Negatives

• Alight reported a net loss of $1 billion in Q2 2025, primarily due to a $983 million non-cash impairment of goodwill associated with its Health Solutions reporting unit.
• Alight lowered its full-year 2025 revenue guidance, citing a lengthening sales cycle and flat participation count.
• O'Charley's experienced a year-over-year decline in guest counts and a double-digit decline in same-store sales, leading to the closure of six lowest-performing locations.
• The Restaurant Group's total operating revenue of $110 million in Q1 was 6.6% lower than the prior year.
• Consolidated operating expenses increased by $30 million year-over-year to $171 million in Q2 2025, driven by management transition expenses.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the termination or inability to complete the Dun & Bradstreet (D&B) and JANA Partners (JANA) transactions.
• Risks associated with the repayment of outstanding debt and the company's capital allocation strategy.
• Risks associated with the use of proceeds to be received as a result of the D&B transaction.
• Risks associated with the company's ability to successfully operate businesses outside its traditional areas of focus.
• Changes in general economic, business, and political conditions, including consumer spending, business investment, government spending, the volatility and strength of the capital markets, investor and consumer confidence, foreign currency exchange rates, commodity prices, inflation levels, changes in trade policy, tariffs on goods, and supply chain disruptions.
• Risks associated with the Investment Company Act of 1940.
• Risks associated with the potential inability to find suitable acquisition candidates, acquisitions in lines of business that will not necessarily be limited to traditional areas of focus, or difficulties in integrating acquisitions.
• Significant competition that operating subsidiaries face.
• Risks related to the externalization of certain management functions to an external manager.
• Risks associated with being the subject of a proxy contest.
• There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call transcript.

Future Outlook

The company expects the Dun & Bradstreet transaction to close in Q3 2025, with approximately $500 million of proceeds allocated for shareholder benefit, including $300 million in share repurchases, $141 million for debt repayment, and $60 million for future dividends. The JANA Partners additional stake acquisition and fund investment are also expected to close in Q3. AFC Bournemouth anticipates the sale of Ilya Zabarnyi and the acquisition of Bafode Diakite, with the 2025 season starting August 15 and stadium renovations (Phase 1) to be completed by the 2026/2027 season. Watkins expects sales to improve in the second half of 2025, targeting $20 million in Adjusted EBITDA for the full year. The margin loan is expected to be fully repaid upon the D&B closing. The 2025 Annual Meeting date will be announced after the D&B closing, anticipated later this fall. Management believes the strategic plan will continue to close the stock price discount to NAV, drive long-term NAV growth, and deliver shareholder returns, and expects to continue participating in future BKFC capital calls while potentially divesting additional restaurant brands over time.

Management Comments

• "The Cannae Board and management team remain focused on executing our strategic plan, designed to increase shareholder value."
• "We believe that we are starting to see the success of this plan as Cannaes stock closed at $19.88 on Friday and traded at a 26.6% discount to NAV per share, near the narrowest discount in more than three years, and well below the near 40% discount when we announced our strategic plan."
• "We expect to utilize approximately $500 million of our proceeds as either a direct return to shareholders or for the benefit of our shareholders."
• "We view the ability to buy Cannaes stock at a discount to NAV will drive net asset value accretion for our shareholders."
• "We believe this dividend provides our long-term shareholders with a consistent return of capital as we execute our strategic plan."
• "We remain excited about this partnership given our belief in the long-term value of the JANA franchise as well as the strategic value to Cannae of the proprietary situations introduced by JANA."
• "With more capital being attracted to professional sports, the limited number of teams available and the valuations rising, we believe BKFC sits in an opportune position to drive value for its shareholders."
• "While we never want to lose exceptional talent, these sales demonstrate the success of the team, the ambition of our recruiting and the long-term goals for Bournemouth."
• "We are excited by the success and trajectory of AFC Bournemouth on multiple fronts. We believe our recognition in Sporticos Worlds 50 Most Valuable Football Clubs is further confirmation of this, and as I mentioned on our last call, this valuation is approximately 40% above our capital invested to date."
• "I think that trend will continue. I think the question we have to ask ourselves is whats the right time and have we extracted all the value that we can out of the individual brand? But I would think that over time we will peel off the additional brands, or at least consider it on a regular basis." (regarding the restaurant portfolio)
• "To conclude, we are excited about the significant progress made on our strategic plan. We believe there is significant upside as we continue to execute the strategic plan and position Cannae as a permanent capital vehicle with proprietary and differentiated investments."

Industry Context

The filing highlights a broader industry trend of increasing capital attraction to professional sports, which is driving rising team valuations and positioning Black Knight Football Club favorably. In the restaurant sector, the mixed performance of Cannae's brands, with Ninety Nine outperforming the casual dining segment average while O'Charley's faces significant headwinds, reflects a challenging and competitive environment where brand differentiation and operational efficiency are crucial. Cannae's strategic shift away from public company investments towards proprietary and differentiated assets aligns with a trend among investment firms seeking to reduce market volatility exposure and enhance control over asset performance.

Comparison to Industry Standards

• Ninety Nine Restaurant and Pub's same-store sales decline of less than 1% and guest counts down 2.5% compares favorably to the Baird Real-Time Restaurant Survey for Casual Dining Segment, which presented a 2% decline in same-store sales for the second quarter of 2025.
• AFC Bournemouth's valuation in Sporticos World's 50 Most Valuable Football Clubs is approximately 40% above Cannae's capital invested to date, indicating strong performance relative to the broader football club market.
• The player sales of Dean Huijsen to Real Madrid for approximately $68 million and Milos Merkez to Liverpool for approximately $52 million (the fifth highest left-back sale in history) demonstrate AFC Bournemouth's ability to develop and monetize talent at a high level within the global football transfer market.

Stakeholder Impact

• Shareholders: Positive impact from significant capital returns (share buybacks, increased dividends), narrowing NAV discount, and strategic rebalancing aimed at long-term value creation. Potential for further NAV accretion from opportunistic investments.
• Employees: Implied impact on employees of O'Charley's due to six store closures. Potential positive impact on employees of successful portfolio companies like AFC Bournemouth and Watkins.
• Customers: O'Charley's customers impacted by store closures. AFC Bournemouth fans will benefit from stadium renovations and continued team success.
• Creditors: Positive impact from the planned full repayment of the $141 million margin loan.
• Suppliers: No direct mention, but general business performance of portfolio companies would affect their suppliers.

Next Steps

• The Dun & Bradstreet transaction is expected to close in Q3 2025.
• Repurchase at least $300 million of common shares from D&B proceeds.
• Fully repay the $141 million outstanding margin loan debt.
• Retain $60 million of D&B proceeds for future quarterly dividends.
• Close the previously announced transaction to acquire an additional 30% stake in JANA and invest $30 million in JANA funds in Q3.
• AFC Bournemouth's 2025 season starts on August 15.
• AFC Bournemouth expects the acquisition of central defender Bafode Diakite shortly and continues to look for other players until the transfer window closes on September 1.
• Phase 1 of the AFC Bournemouth stadium renovation is expected to be completed by the start of the 2026/2027 season.
• Watkins expects sales to further improve through the latter half of 2025.
• Continue to scrutinize the remainder of the O'Charley's restaurant stack.
• Announce the specific date of the 2025 Annual Meeting after the D&B closing, expected later this fall.

Key Dates

Recommendation

The company is executing a clear strategic plan with significant capital returns and portfolio rebalancing, which are positive. Strong performance in Black Knight Football and some portfolio companies like Watkins and Ninety Nine are encouraging. However, the substantial goodwill impairment at Alight and ongoing challenges at O'Charley's introduce notable headwinds. The stock has already seen a narrowing of its NAV discount, suggesting some of the positive news is priced in. A 'Hold' recommendation reflects the balanced view of strong strategic execution and promising assets against existing operational challenges and the non-cash impairment. Investors should monitor the successful completion of the D&B sale, the impact of Alight's revised guidance, and the turnaround efforts at O'Charley's.

Keywords

Cannae Holdings, Q2 2025 earnings, portfolio rebalancing, shareholder returns, Dun & Bradstreet sale, share buyback, dividend increase, JANA Partners, Black Knight Football, AFC Bournemouth, Premier League, player transfers, stadium renovation, Alight, goodwill impairment, Watkins, Restaurant Group, Ninety Nine, O'Charley's, capital allocation, strategic plan