DEF 14A: Cannae Holdings to Redomesticate to Nevada, Seeks Shareholder Approval for Incentive Plan Changes

Cannae Holdings is seeking shareholder approval to redomesticate from Delaware to Nevada and amend its 2017 Omnibus Incentive Plan, including increasing the share reserve and extending its duration.

Summary

• Cannae Holdings is holding its annual shareholder meeting virtually on June 19, 2024.
• Shareholders will vote on several proposals, including the election of three Class I directors, approval of the company's redomestication to Nevada, and an amendment to the 2017 Omnibus Incentive Plan.
• The proposed amendment to the incentive plan includes increasing the available shares by 5,000,000 and extending the plan's duration.
• Shareholders will also cast advisory votes on executive compensation and the frequency of future say-on-pay votes.
• The board recommends voting for all director nominees, for the redomestication, for the incentive plan amendment, for the executive compensation proposal, and for holding say-on-pay votes annually.
• In April 2024, Cannae completed a tender offer, purchasing 9,672,540 shares at $22.95 per share, reducing outstanding common stock by 13.4%.
• The Management Services Agreement with Trasimene is set to wind down, with Trasimene receiving a fixed fee of $7.6 million annually for three years and a $20 million termination fee.
• Cannae has entered a strategic partnership with JANA Partners, involving a minority equity ownership exchange.
• During 2023, Cannae sold 2 million Dayforce shares for $144.7 million and subsequently sold an additional 2.5 million shares for $177.1 million.
• Cannae invested $109.8 million in Black Knight Football and Entertainment during 2023.
• The company sold 1.6 million Paysafe shares for $18.5 million in 2023 and later purchased the same amount for $23.4 million, now holding a 5.5% interest.
• In May 2023, Cannae invested $52.1 million for an 89% stake in Minden Mill.
• Cannae repurchased 6.1 million shares for $118.5 million in 2023, decreasing total shares outstanding by 8%.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both positive developments and potential challenges. The focus on shareholder value creation and strategic initiatives suggests a moderately positive outlook.

Positives

• The redomestication to Nevada is expected to result in tax savings of approximately $250,000 annually.
• The company has a history of shareholder engagement and considers shareholder feedback in board discussions.
• The company has a clawback policy in place to recover incentive-based compensation in certain circumstances.
• The company has a diverse board of directors, with three of twelve directors identifying as having diverse backgrounds.
• The company has a strong focus on cybersecurity, with oversight from the audit committee.
• The company is committed to ESG initiatives, including responsible investment, preserving the environment, supporting employees and communities, and operating ethically.

Negatives

• The company's D&O insurance premiums have increased significantly in recent years, from $0.7 million in 2017-2018 to $2.7 million in 2023-2024.
• The company closed 77 O'Charleys locations in 2023 as part of a strategic reset of the brand.
• The company has been subject to stockholder demands and litigation claims arising under Delaware law, resulting in substantial legal fees and expenses.
• The company's common stock has traded at a discount to the company's fair market value.

Risks

• Climate change and severe weather conditions, cybersecurity risks, pandemics, war, and other catastrophic events may impact the business.
• The company is dependent on information technology, which poses data privacy and cybersecurity risks.
• The company faces the risk of opportunistic litigation for Delaware public companies.
• The company faces the risk of claims and litigation directed towards directors and officers.
• The company faces the risk of opportunistic litigation for Delaware public companies.

Future Outlook

The company plans to continue managing and operating its diversified businesses to create long-term growth and maximize value for shareholders, and to pursue similar strategies when taking significant ownership stakes in new businesses.

Management Comments

• Mr. Foley has demonstrated expertise in creating and operating several public companies.
• Mr. Foleys proven track record is driven by his value creation playbook, which is highlighted by identifying cost savings, undertaking strategy shifts, eliminating siloed organizational structures and accelerating product expansion.
• We believe that Mr. Foleys executive experience and distinctive background has and will continue to have a transformative impact on Cannae and the businesses that Cannae owns and operates.

Industry Context

The document highlights Cannae's strategy of actively managing and operating a core group of companies, which aligns with the broader trend of holding companies seeking to create long-term value through operational expertise and strategic investments.

Comparison to Industry Standards

• The document mentions several comparable companies in the financial services and investment sectors, including Fidelity National Financial (FNF), Fidelity National Information Services (FIS), Black Knight, Inc. (Black Knight), Dayforce, F&G Annuities & Life, Inc. (FG), Dun & Bradstreet, and Alight.
• These companies are used as benchmarks for assessing Cannae's performance and the effectiveness of its management team.
• The document also references specific projects and results, such as the Dayforce IPO and the subsequent sales of Dayforce shares, to demonstrate Cannae's ability to generate value for its shareholders.

Management Changes

Corporate Governance

Related Party Transactions

• The company has a Management Services Agreement with Trasimene, which is affiliated with certain of the company's executive officers and directors.
• The company leases office space to certain businesses owned, controlled by, or affiliated with Mr. Foley.
• The company has a revolver note with FNF, where Mr. Foley serves as the non-executive Chairman of the Board.

Stakeholder Impact

• Shareholders are being asked to vote on several proposals that will impact the company's governance and operations.
• Employees may be impacted by the proposed changes to the incentive plan.
• The company's ESG initiatives are intended to benefit employees, communities, and the environment.

Next Steps

• Shareholders will vote on the proposals at the annual meeting on June 19, 2024.
• The company will continue to engage with shareholders on corporate governance and executive compensation matters.
• The company anticipates publishing its next Environmental, Social & Governance Report in the summer of 2024.

Key Dates

Keywords

Cannae Holdings, redomestication, incentive plan, shareholder meeting, directors, executive compensation, Nevada, Delaware, stock repurchase, management services agreement, JANA Partners, Dayforce, Black Knight Football, Paysafe, Minden Mill, Computer Services, ESG, corporate governance