Cannae Holdings, Inc. Announces Agreement to Wind Down Management Services Agreement

Rhea-AI Summary

Cannae Holdings, Inc. (CNNE) announces the wind-down of its Management Services Agreement with Trasimene Capital Management, LLC, aligning management with shareholders. The agreement includes a fixed management fee, termination fee, and changes in executive roles. The transactions are expected to be marginally accretive to Net Asset Value Per Share.

Insights

Financial Analyst

From a financial perspective, the wind-down of the Management Services Agreement between Cannae Holdings and Trasimene Capital Management has direct implications for Cannae's financial structure. The shift to a fixed management fee structure and the termination fee arrangement could streamline Cannae's operational costs. The fixed fee of $7.6 million for three years, compared to a variable fee structure, may provide more predictable management costs, which could be favorable for financial planning and budgeting. The expected accretion to Net Asset Value Per Share suggests a positive financial outlook, as this metric is a key indicator of a company's financial health, representing the value of the company's assets minus liabilities, allocated per individual share.

However, one must consider the potential risks associated with the termination fee of $20 million, which will be paid in installments. Although spread out, this is a significant cash outflow that could have been allocated towards other investment opportunities or used to bolster the company's cash reserves. Investors should weigh the long-term benefits of reduced management fees against the immediate financial impact of the termination fee.

Market Research Analyst

The strategic move to internalize management functions could be perceived as a proactive approach to aligning the interests of management with those of shareholders. The market often responds positively to such alignment, as it is expected to lead to better decision-making and enhanced shareholder value. Additionally, the collaboration with Jana Partners could signal to the market a strengthened investment strategy, potentially attracting investor interest. The market's reception to these changes will depend on the perceived effectiveness of the new management structure and the success of joint investment activities with Jana Partners.

It is also crucial to consider the broader market implications of such a transition. If successful, Cannae's strategy might set a precedent for other companies considering similar shifts from external to internal management. This could influence market trends, particularly within the investment management sector. The unanimous board approval, excluding the recused members, adds a layer of confidence in the decision, which might be reassuring to current and potential investors.

Legal Expert

The legal considerations surrounding the termination of the Management Services Agreement and the establishment of new employment agreements are significant. The involvement of legal advisors from Skadden, Arps, Slate, Meagher & Flom LLP indicates that Cannae is taking necessary steps to ensure that the transition complies with all contractual and regulatory requirements. The Related Person Transaction Committee's role in receiving financial and legal advice before making a recommendation to the Board suggests a thorough due diligence process, which is critical in mitigating legal risks associated with related party transactions.

Moreover, the recusal of Messrs. Foley and Massey from the board's approval process is a standard practice to avoid conflicts of interest, ensuring that the decision-making process remains unbiased and in the best interest of all shareholders. The legal framework established for these transactions will likely serve as a reference for similar future agreements within the industry, setting a precedent for governance and compliance.

~ Further Aligns Management with Shareholders ~

LAS VEGAS--(BUSINESS WIRE)-- Cannae Holdings, Inc. (NYSE: CNNE) (“Cannae” or the “Company”) today announced that the Company has agreed to wind down its Management Services Agreement (“MSA”) with Trasimene Capital Management, LLC (“Trasimene”).

Effective July 2, 2024, the MSA will be amended and restated to provide that Trasimene will receive a fixed management fee of $7.6 million for each of the following three years, and a $20 million termination fee, payable in three annual installments commencing on July 2, 2024, and no fees thereafter. As a result, Trasimene will not receive any incremental management fees or carried interest on investments made by the Company on or after February 26, 2024, and beginning July 2, 2024, Trasimene will not receive any management fees or carried interest on any of the Company’s investments, other than the arrangements described above.

William P. Foley, II will serve as the Chief Executive Officer, Chief Investment Officer, and Chairman of Cannae’s Board of Directors (“Board”) and has entered into a three-year employment agreement.

Ryan Caswell will cease to be a member of Trasimene as of July 2, 2024, and will continue to serve as the President of the Company and has entered into a three-year employment agreement.

Cannae expects these transactions to be marginally accretive to Net Asset Value Per Share upon the effective date of July 2, 2024.

Mr. Foley commented, “The wind-down of the Trasimene management agreement demonstrates my clear intention of alignment with Cannae’s shareholders. We firmly believe that this transition from an externally managed entity to bringing all management and investment functions into Cannae is the right course of action. We are also very eager to begin to execute our joint investment activities with Jana Partners pursuant to the transaction announced last week.

As top shareholder prior to this transaction and an even larger one after, I am focused on driving shareholder value and closing the gap between the net asset value of our holdings and the current price of Cannae shares.”

These transactions were unanimously recommended by the Related Person Transaction Committee of the Board and were approved by the Board unanimously, other than for Messrs. Foley and Massey, who recused themselves.

The Related Person Transaction Committee received financial advice from Lazard Frères & Co. LLC and legal advice from Skadden, Arps, Slate, Meagher & Flom LLP.

About Cannae Holdings, Inc.

We primarily acquire interests in operating companies and are actively engaged in managing and operating a core group of those companies. We believe that our long-term ownership and active involvement in the management and operations of companies helps maximize the value of those businesses for our shareholders. We are a long-term owner that secures control and governance rights of other companies primarily to engage in their lines of business and we have no preset time constraints dictating when we sell or dispose of our businesses. For more information, see cannaeholdings.com.

Forward-Looking Statements and Risk Factors

This press release, and any related oral statements, contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding our expectations, hopes, beliefs, plans intentions, strategies regarding the future, the potential benefits of the Company’s wind down of its external investment management (including, but not limited to, potential savings following the wind down and the benefits potentially derived by the Company from this transition) are forward-looking statements. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties that forward-looking statements are subject to include, but are not limited to: changes in general economic, business and political conditions, including changes in the financial markets, and changes in macroeconomic conditions resulting from the outbreak of a pandemic or escalation of the current conflict between Russia and Ukraine; risks associated with the Investment Company Act of 1940; our potential inability to find suitable acquisition candidates, acquisitions in lines of business that will not necessarily be limited to our traditional areas of focus, or difficulties in integrating acquisitions; significant competition that our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; risks associated with our split-off from Fidelity National Financial, Inc., including limitations on our strategic and operating flexibility related to the tax-free nature of the split-off and the Investment Company Act of 1940; risks and uncertainties relating to the Company’s ability to retain senior management and successfully manage the transition to internal management and the ability to achieve anticipated cost savings or the timing thereof; unanticipated expenditures relating to, liabilities arising from, or litigation relating to the wind down; and the potential adverse impact, if any, of the announcement or pendency of the wind down and leadership transition on the Company’s relationships with its investment partners.

This press release should be read in conjunction with the risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-Q, Form 10-K and our other filings with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240226308912/en/

Jamie Lillis, Managing Director, Solebury Strategic Communications, 203-428-3223, jlillis@soleburystrat.com

Source: Cannae Holdings, Inc.

FAQ

What is the ticker symbol of Cannae Holdings, Inc. mentioned in the press release?

The ticker symbol of Cannae Holdings, Inc. mentioned in the press release is CNNE.

What changes are being made to the Management Services Agreement with Trasimene Capital Management, LLC?

The Management Services Agreement with Trasimene Capital Management, LLC is being winded down, with Trasimene receiving a fixed management fee and a termination fee.

Who will serve as the Chief Executive Officer, Chief Investment Officer, and Chairman of Cannae's Board of Directors?

William P. Foley, II will serve as the Chief Executive Officer, Chief Investment Officer, and Chairman of Cannae's Board of Directors.

What is the expected impact of the transactions on Net Asset Value Per Share?

The transactions are expected to be marginally accretive to Net Asset Value Per Share upon the effective date of July 2, 2024.

Who recommended and approved the transactions mentioned in the press release?

The transactions were unanimously recommended by the Related Person Transaction Committee of the Board and approved by the Board, with some members recusing themselves.